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Help For Home Buyers

Refinancing Offered To Those At Risk

By KENNETH R. GOSSELIN, Courant Staff Writer

November 09, 2007

First-time home buyers in Connecticut who face steep increases in their monthly payments on high-risk mortgages and the prospect of default or foreclosure may qualify for a refinancing program announced by the governor Thursday.

The new $50 million refinancing program is designed for first-time buyers with adjustable-rate, subprime mortgages who may have gotten into the loans without fully understanding that their monthly payments could rise rapidly after the first two or three years. Many of the mortgages carried low initial rates.

Subprime loans provide financing to borrowers with spotty credit histories.

The program, which will be administered by the Connecticut Housing Finance Authority, would allow qualified applicants to refinance their mortgages into fixed-rate home loans at a quarter-point above CHFA's Homebuyer Mortgage Program fixed rate. The rate is currently 6 percent.

Gov. M. Jodi Rell, at a news conference in her office, said counseling is a key component of the program, ensuring that borrowers understand the implications of paying a mortgage and how that has to be balanced with other bills.

"A lot of these buyers didn't have the education or the savvy to deal with adjustable-rate mortgages," Rell said in an interview. "That's why education is so important in this."

In a slumping housing market, first-time home buyers, in particular, are kept from refinancing because they may not have built up enough equity in their home to help pay for the refinancing. In addition, slowing home price appreciation and, in some markets, declines in values have failed to boost equity as much as expected a few years ago.

Rell said the refinancing program is the result of the work of her subprime mortgage task force. That task force found that there were about 71,000 subprime mortgages in Connecticut worth about $15 billion, with as many as 8 percent of loans seriously delinquent.

About 21,000 are adjustable-rate loans that will continue to reset to higher rates until December 2009. Of those, about 3,000 financed first-time home purchases, according to Gary King, CHFA's president-chief executive and co-chairman of Rell's task force.

King said he expects as many as 400 first-time buyers to benefit from the new program.

Rell said forestalling defaults and foreclosures were not only important to individual families but the state as a whole.

"A stable housing market is critical to a strong and growing economy and vital to the success of strong neighborhoods and healthy communities," Rell said.

CHFA will work with as yet undetermined lenders who will underwrite and make the loans. Then CHFA will immediately buy those mortgages with the proceeds of the sale of $50 million in bonds.

Prospective borrowers must have seen their interest rates rise on their loans and been up-to-date in their mortgage payments for the six months prior to the reset. The borrower also must be able to afford the new loan and other household bills.

Applications for the program will be accepted beginning Dec. 10 and will continue through Dec. 31, 2008.

CHFA has established a call center at 860-571-3500 to help homeowners determine if they are eligible for the program.