ALBANY, NY - It had been about three months since Gloria Collery was able to pay her mortgage, and she was scared. "I started waking up in the middle of the night and thinking 'Oh my God, I may not be sleeping in this bed in a month,'" she said. State lawmakers are hoping that $25 million in counseling and legal assistance approved this month will be enough to help people with subprime mortgages like Collery avoid losing their homes. That's more than 60 times the $388,000 set aside for mortgage counseling last year.
Collery's interest rate on her mortgage spiked more than 3 percentage points in February 2007, or by about $330 a month. By the beginning of 2008, the 46-year-old mother with two teenagers at home just couldn't keep up. She worked three jobs, as a yoga instructor, massage therapist and personal assistant to the disabled, to make ends meet. The economic slowdown sent the cost of food and other necessities up, leaving Collery with fewer massage and yoga clients. Still, she tried to save money, cutting off cable television and the cellular phone. Instead of using her oil furnace, she took care of a friend's horses in exchange for firewood.
Collery found a counselor through the NeighborWorks organization who has helped her work with the mortgage company to come up with a temporary payment plan. The Greenwich, N.Y., resident is taking steps to modify or re-negotiate her loan to a more manageable rate. The U.S. housing downturn has spooked investors around the world and sent stock markets on a rocky ride since August. As home prices continue to fall, foreclosure rates soar and dozens of lenders have shuttered their doors.
Subprime loans target marginal borrowers with weak credit or questionable incomes who previously might not have gotten a loan at all. An estimated 2 million adjustable rate mortgages started resetting last year at sharply higher interest rates, which caused monthly payments to rise sharply.
At least nine states including New York are proposing bills that would give homeowners like Collery better access to foreclosure counseling. California lawmakers have introduced at least nine proposals related to foreclosure, including one that would require lenders to help put a homeowner in default in touch with a licensed credit counseling agency. Kentucky, Illinois, Colorado, Louisiana, Massachusetts, New Jersey and Rhode Island have also considered counseling to combat home foreclosures.
The latest New York state budget dedicates $347 million to affordable housing issues, nearly tripling the amount of assistance offered in each of the past 10 years. Hilary Lamishaw, the director of the NeighborWorks Alliance of New York State, said the influx of affordable housing dollars will help the struggling market overall. "In time, as the money gets out the door, people will be able to have access to new apartments, to new afford home ownership opportunities, to be able to repair their homes, perhaps through small repair programs," she said. "I think that what we'll see is the stock of affordable houses increase and the conditions of the existing housing improve."
The grants for New Yorkers who have risky subprime loans will go through the state Division of Housing and Community Renewal to nonprofit organizations that provide counseling and legal services to homeowners facing foreclosure or who are in default. The program will also help subprime borrowers caught in the national foreclosure crisis restructure the terms of their loans to allow them to continue to live in their homes.
But some say this isn't enough. A bill that was pushed by the Assembly, and failed, would have provided $150 million to help bail out New Yorkers before they lost their homes. To qualify for the funds, homeowners would have had to enroll in counseling and work with lenders to find a realistic payment
Source: AllHeadlineNews.com