New federal data highlight the subprime crisis gripping Bridgeport neighborhoods and other pockets in Fairfield County and Connecticut.
In late January, the Federal Reserve Bank of New York released neighborhood-level data for subprime and alt-A mortgages in most communities in Connecticut, New York and New Jersey. The New York Fed indicated it collected the information to help governments and community groups better address conditions in their jurisdictions.
As of October 2007, there were just over 9,500 homes in Fairfield County under first-lien, subprime mortgages, with 770 of them under foreclosure proceedings, or 8 percent.
What”™s more, another 1,050 Fairfield County homeowners holding such loans will see their adjustable interest rates balloon upward between April and September this year, even as the economy slows.
The statewide foreclosure rate for such loans was about 7 percent; in New York, it was 9.7 percent.
Bridgeport had 4,600 homes under first-lien subprime mortgages, with a residential neighborhood a few miles northwest of downtown totaling 1,500. That was the highest figure of any neighborhood in Fairfield County.
On the flip side, a section of downtown Stamford was the best performing in the county, with no foreclosures among the 24 homeowners holding subprime mortgages. Just behind was the Cos Cob section of Greenwich with no foreclosures on 17 subprime homes.
A mile east, Old Greenwich recorded the highest percentage of subprime mortgages under foreclosure in the county, with five of 26 homes under bank repossession proceedings.
In remarks last month to a gathering of the Business Council of Fairfield County, Fed economist Rae Rosen encouraged local business people to volunteer time to help beleaguered homeowners negotiate a path through their difficulties.
 “Some people will be able to sustain a mortgage ”“ getting help ”“ other people will need to get out of it,” Rosen said. “The army of mortgage brokers has disappeared. We don”™t have an army of counselors for (financial) workouts.”
Still, with recent interest rate cuts by the Fed, refinancing applications nationally are up 92 percent since November, according to the Mortgage Bankers Association (MBA).
“With tighter credit conditions we do not know how many of these applications will become loans, but it is clear that borrowers are responding to the ”¦ drop in rates we have seen,” said Jay Brinkmann, MBA”™s vice president of research and economics.
In early January, five banks created a $125 million mortgage relief fund to bail out borrowers with good credit histories who nonetheless are struggling to make payments. And Connecticut recently expanded its Fair Alternative Mortgage Lending Initiative and Education Services (CT FAMLIES) program in response to the surge in delinquencies.
On Jan. 23, U.S. Sen. Christopher Dodd proposed creating a Federal Homeownership Preservation Corp. to purchase outstanding mortgages at “the steep discounts at which they are currently valued,” in his words. The discounts would then be passed onto homeowners in the form of new, lower-balance mortgages at fixed rates for 30 years.
Dodd estimates the program would require an initial capitalization of between $10 billion and $20 billion; he also called for another $10 billion to help local governments purchase foreclosed homes and resell or redevelop them.
“As a result of predatory and abusive lending practices, the market for subprime, near-prime, and other forms of mortgage credit has gone into a virtual lock-down,” said Dodd, who chairs the Senate Committee on Banking, Housing and Urban Affairs, after releasing his proposals. “Housing starts are at their lowest levels in a quarter-century. Home prices declined last year nationwide, and are expected to decline again this year. That would be the first time since the Great Depression that national home prices have dropped two years in a row.”
