Connecticut’s perceived immunity to the nation’s housing market slump and credit crunch is over.
Reports published last week by Boston-based Warren Group reveal that the tide is turning in the Nutmeg State. A double-digit decrease in home sales along with an alarming number of foreclosures — at 2,948 — in Hartford County alone, reflect the state’s fractured housing market.
Statewide, there have been 12,575 foreclosures, with New Haven County hardest hit with 3,914 foreclosures.
While home sales have plummeted in the past, state officials do not recall when the number of foreclosures has been so great.
“We’re concerned because this is not a typical situation,” said Howard Pitkin, commissioner of the state’s Department of Banking. “This is not something that has happened frequently in the state, and we need to address it.”
The notion that the foreclosure crisis has not yet peaked has Pitkin worried.
Topping the region’s list of foreclosures and pending foreclosures is Hartford, with nearly 500. Statewide, Hartford is ranked third for the largest number of foreclosures, behind New Haven (658) and Waterbury (597).
New Britain’s combined total has climbed past 300, and East Hartford is not far behind, with a total of 264. Several towns, including Bloomfield, Enfield, Manchester, Middletown, Southington and Windsor, have seen more than 100.
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Top Priority
Least impacted in Hartford County are Middlefield, Bolton and Hartland, with single-digit numbers. East Granby and Andover have also escaped the wrath of the subprime debacle.
Although foreclosures are now exploding in Hartford County, the writing was on the wall for several months.
“We saw it coming. I should say, we dreaded it coming for a while,” Pitkin said. “Our goal was to react as quickly as we could.”
Back in April, Gov. M. Jodi Rell convened the Subprime Mortgage Task Force to specifically examine why the number of subprime loans increased so dramatically.
The state stepped up its role in August with the creation of the Mortgage Foreclosure Assistance Hotline, which puts homeowners in touch with a housing advocacy agency or an attorney in an attempt to find a solution.
The issue is clearly a top priority for Pitkin, who said that it is a “lot easier to deal with a banking crisis than people losing their homes.”
There are an estimated 71,000 subprime mortgages in Connecticut worth approximately $15 billion, and it is possible that up to 8 percent of those loans are delinquent, he said.
The seeds that started the current financing fiasco were created during the fiscal climate that followed the Sept. 11 terrorist attacks, Pitkin said. “It happened because the Federal Reserve brought about a credit scenario that had been unheard of,” he explained. “Wall Street showed a willingness to buy pooled obligations, and mortgage brokers could borrow money cheap.”
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Predatory Lending
Though subprime loans bear a significant role in the current foreclosure crisis, predatory loans also contributed to the current credit crisis, said Realtor Nicholle Dagata of CB Premier Realtors in Berlin.
“I can tell you that I’ve had a few people come to me because they were in trouble,” she said. “They had loans where they were fixed for two years at 6 or 7 percent, but it would go up to 9, 10, 11 percent after that.”
Another contributing factor, according to Dagata, is that buyers also borrowed their closing costs, resulting in a mortgage that she describes as a “103-percent loan.”
“These are people who saw their mortgage payment go from $1,200 to more than $2,000,” she said. “This has happened in Farmington, New Britain and Berlin. It’s not just isolated in the big cities.”
However, region’s urban centers have been hit the hardest. Pitkin points out that the largest number of foreclosures is concentrated where the greatest numbers of mortgages were granted.
The fallout from the mortgage crisis may result in new requirements for mortgage professionals. The governor’s task force is recommending legislative changes for mortgage loan originators and supervisors, including up to 40 hours of pre-licensing training and up to 18 hours of continuing education every two years for license renewals.
