Mortgage defaults and foreclosures in Connecticut’s cities have skyrocketed over the past year as homeowners buckle under the weight of rising costs associated with subprime and predatory loans, a real estate tracking company has found.
California-based RealtyTrac said the number of foreclosures increased 547 percent in the New Haven-Milford area, 522 percent in the Bridgeport-Norwalk-Stamford region and 446 percent in the Hartford area in the first half of this year, compared with the same period in 2006.
State Attorney General Richard Blumenthal told the Connecticut Post that his office has been inundated with calls from homeowners seeking help.
“We may be on the cusp of a huge wave breaking over Connecticut. People are very understandably upset,” Blumenthal said.
The attorney general’s office will soon be launching a mortgage assistance program to provide advice and inform borrowers what agencies can help them.
The problem is a national one. About 19 percent of subprime loans made in 2005 and 2006 will end up in default and lead to foreclosures and about 1.7 million families will lose their homes, according to estimates by the Center for Responsible Lending, a nonprofit research and policy organization based in Durham, N.C.
Defaults Rising
Subprime mortgages are risky loans given to people with lower credit scores.
Foreclosure actions for some 550,000 subprime loans were begun last year, the Mortgage Brokers Association estimates. And a report by the congressional Joint Economic Committee last week said nearly 2 million subprime mortgages could go into foreclosure over the next 18 months.
Subprime borrowers have been hurt because their mortgage payments have increased, often by hundreds of dollars a month, as interest rates on their adjustable-rate loans have risen. Industry watchdogs say many did not know their interest rates would increase.
While critics say subprime loans have been predatory and deceptive, others say millions of Americans who wouldn’t have qualified for traditional loans were able to obtain financing to buy their own homes.
Congress is considering new laws to regulate the subprime industry.
U.S. Rep. Christopher Shays, R-Conn., a member of the House Committee on Financial Services, said he is focusing on who is being foreclosed upon and why. He said many subprime borrowers did not put any money down on their loans and “never really owned a home in the first place.”
Shays said he worries that Democrats might try to bail out homeowners with taxpayer money.
“I can’t imagine helping people who should not have gotten a loan in the first place,” he said.
Connecticut Sen. Christopher Dodd, chairman of the Senate Committee on Banking, Housing and Urban Affairs, has been urging the Bush administration to help homeowners facing foreclosure. He supports new laws to stop predatory lending. (AP)