Linda Reid-Williams is in trouble. Her mortgage payment is increasing about $200 next month, and she's worried she can't afford it.
Her plight is an example of the pressures rocking the mortgage industry - pressures rippling through the economy that contributed to last week's stock market swoon.
Reid-Williams tried for months to refinance the house she bought in Yeadon eight years ago, but recently decided against it - to avoid a $4,000 penalty for paying off her existing loan early, she said.
This is quite a contrast from two years ago. When Reid-Williams refinanced in 2005, it seemed like the lender was coming to her rescue with money she needed to pay off her car and other bills. When it was too late, she read the fine print.
"What did I just do?" she recalled asking herself.
Reid-Williams, who works as an aide to the elderly and is between jobs, is far from alone.
Lenders made nearly 48,000 high-cost, risky mortgages totaling $6.54 billion in the eight-county Philadelphia area in 2005, according to the most recent detailed federal data on home loans.
Poor, heavily minority neighborhoods in Philadelphia were not the only hot spots for subprime-mortgage loans - those given to borrowers with shaky credit records. There was also particularly fertile ground in South Jersey. In sections of Pemberton, Winslow and Willingboro Townships, half the 2005 mortgages bore a significantly higher cost for borrowers than prime loans.
In Philadelphia's Pennsylvania suburbs, Norristown, Coatesville, Darby and Yeadon had high proportions of subprime mortgages.
Many subprime loans, including Reid-Williams', had fixed interest rates for two years, but are now resetting to adjustable market rates. That means borrowers may face a 3- to 5-percentage-point jump in their interest rates, to 11 percent or more. The average rate Friday for a 30-year fixed-rate mortgage was roughly 6.37 percent.
Nationwide, about $500 billion in so-called hybrid ARMs are scheduled to reset over the next 18 months, with an average increase in monthly payments of 30 percent, according to the investment bank JPMorgan Chase & Co.
Wayne Huber of Woodbury refinanced a hybrid ARM this month that was going to start adjusting in December. Huber found a fixed-rate loan through Allied Mortgage Group Inc., of Bala Cynwyd. He is happy about it, even though his monthly payment increased $100, to $1,337, including taxes and insurance.
