The Star-Ledger

Rescue Team Sets Out To Aid Homeowners

N.J. program offers support for those in mortgage bind

The Star-Ledger — Thursday, November 1, 2007


In an effort to put the brakes on the growing mortgage delinquency and foreclosure problem in New Jersey, state government, banks and mortgage lenders have teamed up to assist borrowers in danger of defaulting and educate first-time homebuyers on how to avoid potential financial problems.

But up to 40,000 borrowers – including about 19,000 stung by hefty "subprime" loan interest hikes – who have fallen so far behind on mortgage payments they are facing foreclosure or have destroyed their credit ratings cannot be helped by the effort, state officials conceded yesterday.

To qualify for a mortgage rate readjustment by banks or mortgage lenders under the program, a homeowner can't have any late payments during the past 12 months and their credit score must be at least 575.

To qualify after a rate reset, a homebuyer may have up to three 30-day late payments or one 60-day late payment on a mortgage during the past 12 months and there will be no minimum credit score requirement. State Banking and Insurance Commissioner Steven Goldman and Community Affairs Joseph Doria said banks and lenders have $433 million available for mortgage refinancing. Doria added the state Housing and Mortgage Finance Agency will sell $30 million in bonds to provide additional aid. He said another $1 million in HMFA funds will be used to train mortgage counselors to guide homebuyers.

"The impact is softer here than any region in the county, and we intend to face the problem before it becomes a crisis," Goldman said in Trenton.

The mortgage default rate in New Jersey is an overall 4.33 percent compared with the national rate of 5.12 percent and the rates of 4.52 percent in New York and 5.52 percent in Pennsylvania, according to the Department of Banking and Insurance.

As of June 30, 1.2 million New Jerseyans had mortgage loans. Of those, 1,025,431 are "prime" loans, with a delinquency rate of 2.47 percent. The remaining 143,898 loans are classified as "subprime," with a delinquency rate of 13.4 percent.

Doria said about 1,500 financially troubled homebuyers have contacted the Department of Community Affairs seeking aid. He said HMFA staff will review their situations to determine if they will qualify for loans and lower mortgage interest rates.

Sen. Ronald Rice (D-Essex) joined Goldman and Doria at a Statehouse news conference. He said he plans to hold public hearings after the election to determine the extent of the problem and recommend solutions.

Phyllis Salowe-Kaye, director of New Jersey Citizen Action, said the default problem is expected to worsen in New Jersey in the next two years. She said Citizen Action mortgage counselors are finding they are providing guidance to homebuyers from Newark to affluent Livingston and Short Hills.

The state program is dubbed the Homeownership Preservation Refinance Program, or HOPE, and has the support, among others, of the New Jersey Bankers Association, the New Jersey League of Community Bankers, and the New Jersey Bankers Mortgage Association.

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