The state has appropriated more than $100 million in programs to assist homeonwers who are struggling to make payments on their mortgages, but relatively few have qualified for the programs Gov. M. Jodi Rell has touted as potent relief for the subprime mortgage crisis.
Only three loans were approved for the $64 million Emergency Mortgage Assistance Program, which went into effect in July to assist homeowners who face a short-term hardship.
Of the 287 applications received by the Connecticut Housing and Finance Authority, which runs the program, slightly more than 200 have been denied. Seventy more applications are currently under review.
Meanwhile, only one application for the $30 million Homeowner’s Equity Recovery Opportunity Program has been forwarded to a bank for consideration. The HERO’s program authorizes the CHFA to purchase eligible mortgages directly from lenders and to make available to borrowers loans with affordable repayment plans.
“These programs will provide relief to hundreds of Connecticut borrowers who are now facing foreclosure as a result of the subprime crisis,” Rell said in July when promoting EMAP.
The Connecticut Families program, which went into effect last December, has seen much more participation. That initiative allocated $40 million to help subprime borrowers refinance into a 30-year, fixed-rate mortgage at a CHFA rate.
So far, 48 loans worth a collective $9.7 million have been approved, while 11 more loans, worth $2.3 million, are being appraised. Another 121 loans, worth $23 million, are still being processed.
Carol DeRosa, an administrator of the CHFA’s residential mortgage programs, said some of the initiatives have seen limited participation because many homeowners who have applied have no chance of repaying loans.
Of the 200 rejected applications for the EMAP program, 62 were denied because “there was no reasonable expectation that the individuals were going to be able to repay the loan,” DeRosa said.
“We don’t want to provide a false hope,” DeRosa said. “If we know individuals won’t be able to afford their home, we prefer they work with a counseling agency or with their lender to see if they can make modifications to the loans.”
DeRosa recalled one homeowner who had a $150,000 mortgage but only made $15,000 a year. Another was earning $38,000, but trying to pay off a $450,000 mortgage.
The EMAP program was adopted to assist homeowners who face a short-term hardship that results in a 25 percent decline in household income.
It requires lenders or a CHFA-approved credit counseling agency to speak to borrowers facing foreclosure to attempt to resolve the delinquency or default.
If that doesn’t work, then the borrower can apply for an EMAP mortgage, which allows the CHFA to make monthly mortgage payments on the borrower’s behalf for up to five years.
In order for homeowners to qualify for the program, however, they need to have the long-term capacity to repay the loans, DeRosa said.
“We recognize that the pipelines for participation in some of these programs are limited because of the underwriting standards and administrative requirements,” said Chris Cooper, a spokesman for Rell.
Cooper said such programs have been able to help thousands of homeowners in Connecticut. The number of homeowners with subprime loans in Connecticut appears to have fallen. Last November, Rell’s office reported about 71,000 active subprime mortgages in Connecticut, many of which were delinquent and in danger of default.
According to the Mortgage Bankers Association, there were only 54,000 subprime loans in Connecticut at the end of the second quarter of this year.
Cooper said the CT Families program has saved participating borrowers an average of $398 a month. It also got nine counseling agencies to work with borrowers and lenders. In addition, 22 mortgage lenders in the state have joined the HOPE NOW alliance, in which participating companies agree to work with borrowers that they provided subprime loans to.
So far those lenders and borrowers have agreed to repayment plans for 8,325 subprime loans, while 4,227 loans have been modified.
