Dems say Ct. needs to help homeowners

Many facing foreclosure
February 27, 2008 5:02:57 AM PST
Douglas and Kathleen Bastian are desperate to save their Hamden home, but say they've had no luck in refinancing their adjustable rate mortgage, currently set at an unaffordable 14 percent.Because of their poor credit rating and being three months behind in their home loan payments, the Bastians are not eligible for the Connecticut Housing Finance Authority's program that helps first-time home buyers refinance their subprime mortgages.

They've had to cash in their retirement savings and forgo paying other bills in hopes of warding off foreclosure. But David Bastian admits it doesn't look good.

"It's a matter of days - five to 10 days, 15 days maybe," said Bastian, who trekked to the state Capitol with his wife on Tuesday, seeking help from state legislators. "We're just scared. We're scared that we're going to be homeless."

Legislative Democrats point to the Bastians and the estimated 71,000 other subprime mortgage-holders in Connecticut as reason why the state needs to do more to help families keep their homes. Since CHFA began taking applications in December, about 25 families with subprime mortgages have qualified to be refinanced into more affordable, 30-year loans.

"That doesn't show a lot of success in my opinion," said Sen. Bob Duff, D-Norwalk, co-chairman of the legislature's Banks Committee.

Irvine, Calif.-based RealtyTrac Inc., which follows default notices, auction sale notices and bank repossessions, reports Connecticut among the top 10 states with the highest foreclosure rates. Lawmakers said they expect the problem will worsen since many of those 71,000 subprime loans are supposed to reset in the coming months.

"We have a problem that's developing into a crisis unless we take action now," said Senate President Pro Tem Donald E. Williams Jr., D-Brooklyn.

Democrats are proposing a multi-pronged initiative this session that includes new, affordable refinancing programs with more flexible credit underwriting than the CHFA program. They also want to create an emergency mortgage assistance program to provide both continuing and non-continuing loans to borrowers who don't qualify for the other loan programs because of credit problems and other issues. It would be a $100 million revolving loan fund, financed over several years with state bond money.

"It is not a bailout, nor is it a handout," Attorney General Richard Blumenthal said. "It is a hand-up in the most constructive way."

Democrats are considering creating an independent authority, apart from CHFA, that would issue low cost bonds. While the state runs the risk of borrowers defaulting, Blumenthal predicted the rate would be manageable.

Gov. M. Jodi Rell, a Republican, said the number of subprime mortgage-holders who've been able to refinance with CHFA has been small because the authority is bound by underwriting criteria set by the U.S. Department of Housing and Urban Development. She said CHFA is asking HUD to ease up on some of the rules in order to help more people.

But Rell cautioned lawmakers to take steps to protect state funds used to provide refinanced mortgages.

"If they can't make the payments now, what kind of guarantee will we get back as a state ... and is it going to be credit worthy for us to be able to loan money," Rell asked.

Democrats have also proposed giving the state's banking commissioner more powers, such as the ability to suspend foreclosures for six months. Their package calls for new restrictions on mortgage brokers as well.

A hearing is scheduled for Thursday at 11 a.m. on the legislative proposals.