Home Foreclosure With past of federal aid, experts fear increase in foreclosures in CT

With past of federal aid, experts fear increase in foreclosures in CT

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In a typical year as a foreclosure prevention advisor, Herman Gibson can help 30 people overdue on their mortgages renegotiate their loans, go to court, or sometimes find new housing. This year, Gibson has already helped three times as many people.

This is all due to the COVID-19 pandemic and the economic setbacks that have unleashed it for many homeowners across the state, said Gibson, who works for the Hartford-based Community Renewal Team, an anti-profit organization. -poverty.

Now, as the end of mortgage deferrals put in place in early 2020 to help ease the pressure of lost income approach, tens of thousands of Connecticut homeowners face a multi-thousand dollar crisis so that the missed mortgage payments come due.

A house seized in 2013.Brian A. Pounds / File photo

He and other experts fear that many homeowners will ultimately be unable to pay what they owe, paving the way for a potential increase in foreclosures that could have a particularly big impact in Connecticut.

Concern for Connecticut is greater than elsewhere because, in the years leading up to the pandemic, the state’s 90-day delinquency rate – the percentage of Connecticut consumers with mortgages that are 90 days past due. or more – was the second worst in the country and about double the national average, according to an analysis of data from the Federal Reserve Bank of New York.

“If I haven’t paid my mortgage in three months, I won’t be able to pay that kind of money. I don’t think a lot of homeowners can do it, ”said Jason Richardson, director of research and evaluation for the National Community Reinvestment Coalition.

Connecticut maintained the second-worst delinquency rate during the pandemic, until the end of 2020, although delinquency rates declined slightly with the help of COVID-19 relief programs.

Gibson said many of his customers were on shaky ground before the pandemic, working in service jobs, for example, that don’t provide year-round income. Many were unaware that they owed their missed mortgage payments at the end of the federal relief period.


“It was all just water accumulating behind the dam,” he said.

Nationally, mortgage debt increased dramatically during the pandemic.

“Not even during the worst of the Great Recession, have so many borrowers fallen so far behind”, the Consumer Financial Protection Bureau said at the end of June.

In March 2020, Congress passed legislation to protect homeowners from losing their homes during the pandemic. Shortly after President Joe Biden took office in January, his administration extended that aid, ending foreclosures until the end of July.

Then, the Consumer Financial Protection Bureau promulgated at the end of June rules also aimed at thwarting any increase in foreclosures.

During the pandemic, the federal government also gave borrowers the option of resorting to an 18-month forbearance or temporary payment freeze. Thousands of people in Connecticut took advantage, peaking at 66,000 properties in June 2020, according to information from financial services and analysis firm Black Knight, Inc. About 23,100 properties in Connecticut were still forborne as of June 2020. September 1st.

Yet, due to the relief that was available to homeowners during the first 18 months of the pandemic, it is difficult to estimate how many Connecticut mortgage holders could be at risk of losing their homes in the months to come, in the absence of any help.

But with forbearance opportunities starting to dry up as the pandemic hits its 18th month, borrowers will find themselves forced to pay the payments they have deferred.

Some homeowners may face foreclosure. Others might refinance their loans or seek adjusted payment plans. For families who have lost their jobs and are 90 days or more behind on mortgage payments, it will likely be difficult to catch up, Richardson said.

About 1% of Connecticut mortgage creditors have been past due three months or more, according to the Federal Reserve Bank of New York. It is the second highest rate in the country and about double the national average. The only state with a worse delinquency rate is New York at 1.24%.

Connecticut has maintained one of the worst rankings on this measure since the mid-2010s, after many state economies fared better from the Great Recession.

Fred Carstensen, an economist at the University of Connecticut and director of the Connecticut Center for Economic Analysis, said the state’s consistently high delinquency rate is a factor in the state’s “extraordinarily weak economy.”

After the recession, Carstensen said: Connecticut has failed to keep pace with a modernizing and increasingly digital market. Jobs were lost in high-wage industries like finance, insurance and pharmaceuticals, he said, and economic output was stagnant even before the COVID-19 pandemic. He said Connecticut’s negative 1% growth rate in the decade since the 2008 recession is the worst performance of any state in the country.

“It is the worst performing state economy in the country by a significant measure,” he said. “The quality of jobs in Connecticut has systematically deteriorated.”

This trend disproportionately affects people in lower-paying jobs the most, Carstensen said, which could spill over into the relatively high rate of missed mortgage payments.

Connecticut also experienced a “high degree” of predatory lending practices prior to the 2008 recession, and it was difficult for many to bounce back, said Jeff Gentes, senior counsel for the Fair Lending and Foreclosure Prevention Project at Connecticut Fair Housing Center.

The state’s relatively high inequality rates have also contributed to Connecticut’s high mortgage delinquency rates, he said.

“It took us a long time to get over this [the recession], and now the effects of the pandemic have been borne disproportionately by people of color, people of little wealth, ”Gentes said.

Gentes said the number of foreclosures had not yet increased. But he predicts that they will start to rise as people move out of forbearance this fall.

However, in recent weeks, the types of foreclosures Gentes has seen have deviated from the norm.

Most of the foreclosure prevention cases were not related to mortgages – foreclosures of tax debts, sewer liens, condominium association fees and other charges, Gentes said. Forbearance options did not freeze non-mortgage payments, and homeowners may have missed payments during forbearance.

He has also seen an influx of foreclosure cases stemming from second mortgages. Whether or not a lender takes foreclosure action on a second mortgage usually depends on the current value of the home, and average home prices are currently on the rise.

“We’re getting a lot more second mortgage calls than before,” Gentes said. “It’s like the second mortgage was so underwater, then something happened to it.”

Gov. Ned Lamont spokesman Max Reiss said funding for the state homeowners assistance program “will be essential to keep families safe and keep them in their homes.”

Many mortgage assistance is still available through the state’s Homeowner Assistance Fund Program. Now in the second phase of its pilot, the program allows homeowners with certain mortgage agents who earn up to 100% of their median income in the area to obtain up to $ 20,000 in mortgage assistance.

The pilot, managed by the Connecticut Housing Finance Authority, is funded by the $ 10 Million Federal US Rescue Plan. A public comment period on the $ 123 million full program plan ended on Friday.

Gibson’s agency, Community Renewal Team in Hartford, offers grants of up to $ 8,000 for low-income borrowers who live in Hartford or Middlesex counties, earning less than twice the federal poverty level and missed mortgage payments specifically because of COVID-19.

Gibson said the worst thing anyone who is late can do is ignore the problem.

“Keep the lines of communication open with your lender,” he said. “Be responsive. Do not abandon.


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