Asbury Park Press

Mortgage Misery

Asbury Park Press — Sunday, August 19, 2007


Homeowners facing foreclosure will get no help soon from a $30 million state rescue program because officials have suspended the effort before it even started.

The decision comes as foreclosure lawsuits in New Jersey are on pace to rise to their highest level in at least 12 years.

The state's Housing and Mortgage Finance Agency has stopped the foreclosure rescue program after meeting with activists, who said the standards were so high that few homeowners in fiscal trouble would be able to qualify.

The delay will affect people like Stephanie L. Cannizzaro and her family in Manchester, who now face foreclosure because they cannot make payments on a high interest rate loan, commonly called a subprime loan.

Cannizzaro, 34, said she was told by state workers early this month to apply for a loan under the program. But when she did, she could not meet the stringent credit requirements.

"They're rescuing people who are rich and had one late payment," Cannizzaro said. "They're contradicting themselves. They say their program is for homeowners who are suffering from predatory lending and adjustable-rate loans."

The executive director of a nonprofit community activist group said state officials told her they had intended to start the program at the beginning of this month.

State officials said they reconsidered offering the program after meeting with the group and a state senator.

Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, a Newark-based nonprofit that provides credit counseling and also helps find financing for homeowners in trouble, said the state program's requirements were so tough that it would help only people who would be able to refinance in the open market.

Homeowners, like Cannizzaro and her husband, Paul, who have missed multiple mortgage payments, have already seen their credit ratings drop precipitously, Salowe-Kaye said. Most lenders won't touch them, she said.

Yet even if the state's requirements were lowered, the $30 million program would provide refinancing for only about 160 homeowners, Salowe-Kaye added.

"What are they going to do with the rest of the people in danger of losing their homes?" Salowe-Kaye asked. "This should not be the only thing out there today to help people. This program doesn't deal with the most vulnerable."

More foreclosures

According to state data, 16,230 foreclosure complaints were filed in county courts through the first six months of 2007.

That's well ahead of the pace for 2006, when 24,831 foreclosure complaints were filed, and more than any year since at least 1995, according to available records.

An Asbury Park Press analysis published in March showed that homeowners locally and around the state had borrowed heavily against their houses in recent years, and thus could be vulnerable to mortgage problems.

Nearly one in five mortgage loans granted for homeowners in Monmouth and Ocean counties, and across New Jersey, were subprime loans in 2005.

Residents of Monmouth and Ocean counties refinanced mortgages or borrowed on home equity lines to the tune of $33.5 billion from 2003 through 2005, the peak refinancing years. That was about a quarter of the estimated residential value.

State officials announced the foreclosure rescue program in May. They had intended to issue bonds to pay for the program, which would feature 40-year mortgages with an estimated 6.75 to 7.5 percent interest rate.

Marge Della Vecchia, executive director of the Housing and Mortgage Finance Agency, declined to discuss possible changes to the program or when it may start. She did say credit scores will not decide solely whether or not to qualify residents.

"We're doing everything possible to design this program to be as user-friendly as possible," Della Vecchia said. "We will come out with the program when the program is ready."

Several lawmakers, such as state Sen. Ronald Rice, D-Essex, have called on the state to offer millions more in aid.

Rice said he wants to call a meeting of bankers, community activist groups and state officials before the state decides its next step. He said he hopes bankers can come to terms with many homeowners facing foreclosure before the state taps taxpayer funds.

Taxpayers should not be on the hook to finance a bailout, Salowe-Kaye said. Instead, it should be the Wall Street firms that provided easy credit to unqualified buyers to begin with, she said.

Failed to read paperwork

Homeowner Cannizzaro said help can't come soon enough for her and her family.

She said she and her husband had applied late last year for a 30-year, fixed-rate refinance loan, at 8.65 percent, from New Century Mortgage, and were prepared to make the payments on the $249,000 loan based on the paperwork they had received in the mail.

But the mortgage salesperson who showed up at their home in January to execute the closing told the couple that she was late for her next appointment, and asked them to sign the papers quickly. The salesperson, Cannizzaro said, told them the loan terms were the same as they had received by mail.

Cannizzaro said because of the rushed nature of the process, she and her husband didn't read the paperwork before they signed.

Cannizzaro said they later realized they had actually signed an adjustable-rate loan for $272,000 that started at 11.3 percent and called for $2,900-a-month payments, at least $1,000 more than they had expected.

She said they also were charged points and origination fees they had not expected.

But since they signed the loan, lawyers the couple consulted have told them, they have no legal recourse.

New Century Mortgage of Irvine, Calif., once a major lender to borrowers with weak credit ratings, is in the process of being liquidated and no longer issues loans. It is one of a score of lenders specializing in loans to riskier homeowners to become defunct this year.

Cannizzaro said the couple is trying to renegotiate with the company that now owns their mortgage loan.

Cannizzaro said she and her husband, a New Jersey Transit employee, are volunteer members of the Manchester Fire Co. They would like to stay in Manchester, but the family faces foreclosure after missing four monthly payments totaling about $11,600.

If evicted, the couple and their three teenage children worry about where they will go, she said.

"We want to be here for the long term. We're involved in the community, we love the neighbors," Cannizzaro said. "For seven years we never had a late (mortgage) payment. But one bad loan, we're going down the tubes."

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