Web Sites, Documents and Articles >> Hartford Courant  News Articles >

For Conn., Report Says, More Subprime Problems

By KENNETH R. GOSSELIN | Courant Staff Writer

June 28, 2008

A report released Friday indicates that the state's mortgage foreclosure troubles could become deeper and last longer than expected.

New figures show the state has 77,000 active subprime mortgages totaling about $17 billion. Of those, about 15 percent or 11,550loans totaling $2.5 billion were seriously delinquent and headed for foreclosure as of Dec. 31.

That compares with an earlier report showing Connecticut had 71,000 subprime mortgages totaling $15 billion, with about 8 percent or 5,680 totaling $1.2 billion that were seriously delinquent as of March 31, 2007.

The new figures, released by the governor's subprime task force, also show that two-year, adjustable-rate, subprime mortgages will continue to reset to higher rates through the first half of 2009. Previously it was forecast that the resets would wind down by the end of this year.

Two-year, adjustable mortgages represent about a third of all subprime mortgages in the state but have become a prime driver of the increase in foreclosures in Connecticut, experts say.

Connecticut's foreclosure troubles are dwarfed by those in states such as California, Florida and Nevada. But the increased delinquencies outlined in the report are prompting concerns that foreclosures could continue to increase, and for a longer period of time.

In the first three months of this year, foreclosure filings in Connecticut rose 42 percent, according to The Warren Group.

"It might get worse before it gets better," state Banking Commissioner Howard Pitkin, a member of the task force, said Friday. "My major concern goes to the resets, the economy and the timing of higher energy costs and food prices."

Resets can push a home loan's interest rate significantly higher, sometimes by two or more percentage points. On top of that, higher costs for gas, home heating oil and food can strain household budgets to the point that borrowers fall behind in monthly mortgage payments, Pitkin said.

About half of the subprime loans in Connecticut were used to refinance an existing mortgage and to take out extra cash.

Subprime lending in Connecticut dropped off sharply in 2007 9,200 loans were approved last year compared with 40,000 in 2006. But the new totals released Friday rose because more loans were made in 2004, 2005 and 2006 than were previously counted by First American Loan Performance, the company that collected the data for the report.

"Connecticut is no Florida or California," said Ronald F. Van Winkle, a West Hartford economist, "but we're still at the center of the storm."

Van Winkle said the housing market in Connecticut may not bottom out until well into 2009.

Foreclosures affect the values of homes even when owners are current with their payments. Foreclosed properties are often sold at prices well below where they would sell in a healthy market, pulling down the value of similar homes in the surrounding area.

Although he is concerned about the subprime delinquencies, Pitkin said he believes state and federal homeowner rescue programs will keep many borrowers in their homes.

In Connecticut, new bailout programs passed by the legislature take affect Tuesday. Gov. M. Jodi Rell's CT Families program has approved 66 loans valued at $14.1 million.

Pitkin noted that major subprime mortgage servicers including Countrywide, Chase and Wells Fargo — have renegotiated terms on 589 loans and are working on another 1,663.

"Although we have made a good start in helping thousands of people, we know there is still more work to do," Rell said Friday.

Reprinted with permission of the Hartford Courant. To view other stories on this topic, search the Hartford Courant Archives at http://www.courant.com/archives.
| Last update: September 25, 2012 |
     
Powered by Hartford Public Library  

Includes option to search related Hartford sites.

Advanced Search
Search Tips

Can't Find It? Have a Question?