Asbury Park Press

Feds Help People Facing Foreclosure

Asbury Park Press — Friday, December 7, 2007


The Bush administration announced a national effort to fend off another wave of mortgage problems next year, but that will not help tens of thousands of New Jersey homeowners who are behind or facing foreclosure on their loans.

The Mortgage Bankers Association said Thursday that New Jersey borrowers were a month delinquent or worse on one out of every 15 mortgage loans in New Jersey – roughly 82,000 loans. That's 6.5 percent of the 1.3 million loans statewide, up from 4.9 percent a year ago.

For those with so-called subprime loans, nearly one in four are late on payments or in foreclosure. "Those are sad and unbelievable numbers," said P.G. Waxman, broker for Waxman Realty in Lakewood. Waxman said he's seen local couples divorce and homeowners suffer heart attacks because of pending foreclosures. "Statistics don't portray the toll the foreclosures take on families, marriages and the health of those who suffer through them," Waxman said. "(Borrowers) don't just lose their house; they lose their dignity."

Nationally, the Mortgage Bankers reported that 5.6 percent of all residential loans were in arrears, and another 1.7 percent were under foreclosure. The percentage of loans entering foreclosure in the past quarter set a record.

Meanwhile, President Bush and Treasury Secretary Henry Paulson announced a plan to freeze interest rates on subprime mortgages that are scheduled to rise on adjustable-rate mortgages in the coming months. "There is no perfect solution," Bush said Thursday as he announced an agreement hammered out with the mortgage industry. "The homeowners deserve our help. The steps I've outlined today are a sensible response to a serious challenge."

The administration's effort is aimed at stemming a further tidal wave of foreclosures in coming years as 2 million subprime mortgages - loans provided to borrowers with spotty credit histories or who were borrowing with little equity in their home - reset from their introductory rates, adding hundreds of dollars to the typical monthly payment.

The highest-profile part of the plan would freeze introductory "teaser" rates on certain subprime mortgages, preventing rates from rising for five years. This offer would apply only to people living in their homes and who have not missed any payments at the lower rate. It also only would apply to loans taken out between 2005 and this past July 30 and scheduled to rise to higher rates in 2008 and 2009.

'Not a silver bullet'

The hope is that the five-year freeze will buy time for the housing sales and prices to start rising again. Such a rebound would enable homeowners to refinance their current adjustable rate mortgages into fixed-rate loans with more affordable monthly payments.

But even Paulson, who led the negotiations with the mortgage industry, acknowledged the effort is "not a silver bullet." Locally and statewide, there was mixed reaction to the announcement.

Byron Kotzas, founder of Crossroads Realty in Toms River, said the government should have gone further by ordering mortgage companies to allow borrowers to make interest-only payments for several years until they are financially stronger. "Freezing a payment they can't afford already doesn't help," Kotzas said. "This is like giving the patient mouth-to-mouth resuscitation after they've died. You have to give people a lesser payment."

Kotzas said that while he has seen worse real estate markets, he is concerned about the rising foreclosures hurting housing values across the board. "Foreclosures take money out of everybody's pocket, that's what foreclosures do," Kotzas said. "You bought a $500,000 house, now it's worth $400,000 and you didn't do anything wrong."

Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, a consumer advocacy and credit counseling group in Newark, said she was disappointed the new help from Washington did not include homeowners already in trouble. "The lenders have been targeting low-income minority borrowers whose credit wasn't great," Salowe-Kaye said. "Most of the people walking through our doors have houses with no equity and no ability to pay. They couldn't pay the initial teaser rate."

More optimistic views

Others said they believed a breather for homeowners facing new rates next year might be a big help. "It'll calm down fears of people who have potential to see their mortgage payments increase by as much as 50 percent," said James Brown, executive vice president of USA Financial Services in Spring Lake Heights. "If they can keep paying until they can refinance out of a loan - that's a good thing," Brown added. "A paying loan is better than a nonpaying loan."

Jack Oujo, a financial adviser in Wall, agreed that a rate freeze would help borrowers reassess their finances. He said some should probably decide to sell houses and buy something more affordable. But he said he was concerned that for many, American materialism may take over again. "I have every faith in the American consumer to live above their means," he said. "It's just part of our culture."

The Associated Press contributed to this story.

Top Top | NJCA in the News | NJCA Homepage