Governor Rell’s Sub-Prime Mortgage Task Force Provides
Update on Activities, Industry Situation
This news release was issued by the Governor's OfficeJune 27, 2008
Governor M. Jodi Rell today said her Sub-Prime Mortgage Task Force has given her an update on its activities since submitting a November 2007 report that formed the basis of her proposals for the 2008 legislative session and Public Act 08-176, An Act Concerning Responsible Lending and Economic Security.
The Task Force has worked with the Department of Banking, lenders and others to hold a number of housing fairs and public awareness programs where mortgage holders can meet with banks, mortgage companies and others to work out loan modifications or other arrangements to preserve their homes. Events have been held in Norwich, Waterbury, Hartford, Bridgeport and New Haven. Another Foreclosure Prevention Seminar is scheduled for Hartford on June 28.
The panel has also continued to research and monitor the sub-prime loan industry in Connecticut. The number of new sub-prime loans in the state has dropped dramatically, with about 46,000 sub-prime originations reported in 2005, more than 40,000 in 2006 and about 9,200 in 2007.
“My Administration continues to make every effort to help the homeowners of Connecticut hang on to their single most important asset,” Governor Rell said. “The credit crunch that began last summer is still making life difficult for borrowers. Although we have made a good start in helping thousands of people we know there is work still to be done – work in assisting homeowners and work in reforming the industry.
“Shortly after the mortgage crisis began, I announced the CT FAMLIES program to help borrowers with adjustable-rate mortgages that were about to reset to unsupportable interest rates,” the Governor said. “The new law I signed this month directs additional funding to the CT FAMLIES program as well as the Emergency Mortgage Assistance Program – both of which are operated by the Connecticut Housing Finance Authority – and creates a new service called the Homeowners Equity Recovery Opportunity, or HERO, program. Most of the money for these programs is coming from existing bond funds, so the burden on taxpayers is minimized.
“In addition to those programs, we are offering mediation services through the Judicial Branch and stiffening the regulations and requirements for mortgage brokers and lenders,” Governor Rell said. “The Task Force is building on these efforts and will continue to provide recommendations on how we can help distressed borrowers and prevent problems in the future.”
The Task Force’s analysis of mortgages in Connecticut finds that about half of the roughly 77,000 active sub-prime loans issued in the state have been used to refinance homes and take out cash for other purposes. About 42 percent were used to purchase a home while the others were used to refinance without taking out cash.
About 15 percent of all sub-prime loans in the state were seriously delinquent as of December 2007. Most of the seriously delinquent loans are “2-year hybrids” – loans with a fixed rate for the first two years that resets to a new rate in the third year.