The Times, Trenton

Singing The Mortgage Blues

Hundreds of homes in Mercer enter foreclosure with no end in sight

The Times of Trenton — Monday, March 31, 2008


Otis Boone describes his housing problem as "a funny situation," but stories like his have become common in Mercer County and around the country.

In August 2005 he and his wife moved out of Trenton and got a zero-down loan on a newly built home on Saratoga Avenue in Ewing Township. Boone, who worked in the shipping department at a train manufacturer, hurt his back the following year, went on disability and saw his income cut in half.

He couldn't keep up with the mortgage payments of $1,900 per month, plus taxes and other expenses, as well as the prospect of even higher payments when his adjustable rate mortgage resets, he said.

Putting the place up for sale brought no offers, so last August the couple moved out of their home, which remains unoccupied, and moved into an apartment in Hamilton.

"At the time when I wasn't making the payments, something like this never happened to me before," said Boone, 59. "I wanted to get an apartment before my credit really got bad. I don't know where I can get the money unless I get a miracle."

As years of unrealistic subprime loans collide with job losses, personal misfortune and the slumping housing market, hundreds of Mercer County residents face similar crises. The number of county properties entering foreclosure hit a recent peak in January, and mortgage counselors who try to help people keep their homes say they see no end in sight.

The county had 180 foreclosure filings in January, according to records kept by County Clerk Paula Sollami-Covello. The number fell slightly to 167 in February and remained relatively high in March, with 145 filings received through Tuesday.

In March 2007 the county had a similarly high 176 filings, while the figures were lower through much of last year. Banks and mortgage companies file foreclosures when homeowners fall behind in their mortgage payments, but most do not result in people losing their homes.

Tracking the number of foreclosed homes is difficult because some of the filings include more than one property. But records maintained by private real estate companies, and the experience of counselors, confirm that owners keep falling behind on their payments at high rates.

"The numbers for us continue to rise," said Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, whose Trenton office has been overwhelmed with homeowners seeking help. "We're at overcapacity and we see nothing letting up."

RealtyTrac, a California company that has its own system for tracking foreclosures, reported a recent high of 452 filings in September in Mercer County and 349 in October. Last month the company reported 216 foreclosures.

New Jersey as a whole had 5,598 foreclosures in February, the highest figure in at least a year, according to RealtyTrac.

Though the numbers appear grim for homeowners, most actually escape the foreclosure trap. For example, in 2007 the Mercer County sheriff's office processed 462 foreclosures that had already made their way through the courts. Of those, 182 properties ended up in the lender's possession and 32 were sold, chief clerk Deborah Maloney said.

In the other cases the homeowners declared bankruptcy, paid their debt or were otherwise able to hold onto their properties.

To help increase the number of people who can keep their homes, counselors try to convince lenders to reduce customers' interest rates or convert their loans from adjustable to fixed rate.

Boone attended a city-sponsored workshop in Trenton for people facing foreclosure earlier this month, and said he's hoping one of the nonprofits that had counselors there, the Neighborhood Assistance Corporation of America, can help him work out better terms with his lender so he can move back home.

"I got to pay them some money back anyway, and I figure if I can get it low enough, maybe I can get in there and get everything back to rolling like it was," he said.

In addition to helping individuals who are facing foreclosure, the organizations are also pushing for federal legislation to change home financing rules.

With the government pledging billions of dollars to ensure the financial health of the big investment companies that back the mortgage industry, the organization wants to see comparable help provided to homeowners, said Jim Walsh, a program director at New Jersey Citizen Action.

"The response we've seen from the federal government is to pump more money into Wall Street," Walsh said. "Wall Street is being bailed out and the homeowner is being left on the curb."

The coalition is pushing for the government to take over loans that can't be renegotiated and offer better terms, while repackaging the restructured loans into safer investments, he said.

Other possible measures would ban refinancing that ends up costing more than the original loan, forbid bad loans that the homeowner could never pay off, create rescue funds for people who have fallen behind on payments, and require more documentation from lenders showing how many failing loans they have renegotiated, Walsh said.

Salowe-Kaye said the group is additionally trying to prevent future hardship by educating first-time homebuyers and making sure they get mortgages they can afford over the long term.

She said the bursting of the housing bubble has put more homes within reach of inexperienced first-time buyers. Despite the subprime loan crisis, she continues to see newspaper advertisements offering adjustable-rate loans to people without credit histories, she said.

However, E. Robert Levy, executive director of the Mortgage Bankers Association of New Jersey, said the subprime market is "essentially dead."

"What you're going to have now is the most conservative approach to underwriting, whether it's 20 percent down or whatever, and also watching the ability to pay," he said.

The mortgage companies that have not gone out of business because of excessive loan defaults are now focused on trying to help people keep their homes, because "nobody wins when they go into foreclosure," Levy said.

When lenders foreclose, they lose payment streams and are stuck with homes that are difficult to sell.

Levy also defended the subprime industry, saying that about 85 percent of its borrowers have been paying off their loans according to their terms. The others, he said, made the mistake of relying on a "crazy housing market" and fell victim to a confluence of economic factors.

"The whole concept was to make housing more affordable and find a way to provide loans to people who wouldn't have been able to access the market," Levy said. "Subprime shouldn't have been a dirty word."

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