"That's going to be an instance when we have to bring in the lender and get them to bring their price down," Brian Hudson, executive director of the Pennsylvania Housing Finance Agency, said yesterday.
Hudson is scheduled to be in Philadelphia today for an announcement by state lawmakers of funding for a reserve to cover expected losses in the workout program, which involves riskier loans than the straightforward refinancings of adjustable-rate mortgages into long-term, fixed-rate loans.
State officials across the country are grappling with responses to high rates of mortgage delinquency concentrated among borrowers with poor credit, many of whom got mortgages with a low fixed rate for the first two years, followed by an adjustable rate for the rest of the mortgage. Many borrowers assumed they could refinance.
The share of subprime mortgages in Pennsylvania with payments at least 60 days late was 12.6 percent in February, up from 10.5 percent the year before. In New Jersey, the delinquency rate jumped sharply to 12.5 percent in February from 7.2 percent the year before.
"This program is absolutely necessary," Susan Bass Levin, commissioner of the New Jersey Department of Community Affairs, said yesterday.
Levin said final details of the New Jersey "Rescue" program were being worked out, but she said the idea was to get borrowers into a 40-year, fixed-rate loan.
She cautioned that "not all borrowers will qualify" and that the program would not lend more than the house is worth.
New Jersey residents making as much as $135,000 annually - depending on the county they live in - are eligible for the refinancing program. Bass said she anticipated offering interest rates of 6.75 percent and 7.50 percent, depending on bond-market pricing.
The challenge in such bailout programs is to help homeowners in a way that does not reward lenders for making bad loans.
Ohio, which is among the states hardest hit by the subprime delinquencies, launched a refinancing program April 2. So far, the program has set aside $5.6 million to refinance 43 loans, but it has not yet closed any, said Joel Ghitman, director of homeownership at the Ohio Housing Finance Agency.
The Ohio program is for a limited number of borrowers. "If they are already facing foreclosure, they are probably not going to be eligible for this program," he said.
For More Information
New Jersey has set up a Web page for borrowers who think they have a mortgage that is inappropriate for them. Read more at
hmfa/consu/owners/rescue.html or call the N.J. Housing and Mortgage Finance Agency at 1-800-654-6873.
Contact staff writer Harold Brubaker at 215-854-4651 or email@example.com.