Governor Rell Lauds $100 Million “Mortgage Relief Fund” to Assist Subprime Borrowers
Four New England Banks to Offer Refinancing to
Homeowners Affected By Mortgage Crisis
This news release was issued by the Governor's Office.
Governor M. Jodi Rell today announced that four New England banks are offering an initiative called the Mortgage Relief Fund -- a new $100 million refinancing program to help address the subprime mortgage crisis in Connecticut and other New England states. The initial $100 million committed by the banks could be expanded depending on demand. The participating banks are Citizens Bank, Sovereign bank, TD Banknorth and Webster Bank. The program was announced today in Boston.
There are approximately 71,000 active sub-prime mortgages in Connecticut and many are delinquent and in danger of default. Approximately 21,000 of these adjustable rate (sub-prime) mortgages are scheduled to reset at much higher rates between now and December 2009.
“Many homeowners in Connecticut are struggling with mortgage payments that suddenly and dramatically increased as a result of sharply higher interest rates,” Governor Rell said. “Last month, I announced the CT FAMLIES program in Connecticut and the demand for that refinancing program has been tremendous. This new initiative represents another important resource to help people keep their homes.
“This issue is about protecting the most important investment many of these families have ever made and I am pleased that these banks have stepped forward with the new Mortgage Relief Fund,” the Governor said. “While it cannot help every borrower, it may be able to help as many as 25 percent of New England’s subprime borrowers.”
The Mortgage Relief Fund targets borrowers who are paying high rates despite good payment histories and are residing in homes that are worth more than their current loan – yet are finding their refinancing options limited because the mortgage company that wrote their initial loan is no longer operating. Research by the Federal Reserve Bank of Boston indicates about 25 percent of subprime borrowers do have solid credit histories and some equity and the program seeks to specifically help these borrowers.
Information on the new program is available online at www.MortgageReliefFund.com. The banks will share the costs for paid advertising and will also feature the program on their individual websites. The initiative will be promoted in both English and Spanish-language versions on the websites.
The initiative involves the support of state and federal officials and the Federal Reserve Bank of Boston. The program will complement other efforts to address the subprime lending crisis, such as the 5-year rate-freeze initiative announced recently by the federal government and -- in Connecticut -- the CT FAMLIES program being administered by the Connecticut Housing Finance Authority (CHFA).
The Governor announced the CT FAMLIES program on November 8th to assist low and moderate income borrowers who took out a subprime loan to purchase their first home by refinancing them into 30-year, fixed rate amortizing loans. CT FAMLIES loans are being offered at .25% above CHFA’s regular rate, which is currently 6.00%.
“Programs like the CT FAMLIES refinancing program and the Mortgage Relief Fund will help get borrowers back into a stable mortgage with rates and terms they can afford,” Governor Rell said. “These programs will help many families keep their homes. A stable housing market is critical to a strong and growing economy and vital to the success of strong neighborhoods and healthy communities.”
On April 10, Governor Rell convened a Sub-Prime Mortgage Task Force to determine the scope of the problem in Connecticut, to complete a definitive analysis of the issue including the number of Connecticut families currently holding sub-prime mortgages and the number in foreclosure and to make recommendations regarding how those families might be helped.
The Task Force found that sub-prime mortgage lending increased dramatically nationally and in Connecticut from 2001 through 2006 and that underwriting standards were noticeably relaxed during this time period. Significant defaults of sub-prime loans led to a general tightening of credit for sub-prime borrowers making refinancing difficult or not available and exposing many borrowers to significant payment increases and additional defaults.
CHFA began taking applications for the new CT FAMLIES program on December 10th. A call center (tel. 860-571-3500) at CHFA can help borrowers determine if they will qualify for the program.