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Federal Program Designed To Keep 'Underwater' Homeowners Afloat

KENNETH R. GOSSELIN

March 05, 2009

On the day that the Obama administration launched a major foreclosure prevention program, new data showed that 14 percent of all single-family houses and condominiums in Connecticut had mortgages larger than what the properties were worth.

Across the state, 95,640 residential properties had mortgages exceeding their market values, with the largest share — 76,302, or 11 percent — having mortgages that exceeded the value by 5 percent or more, according to The Warren Group, which tracks real estate in New England.

How many of those Connecticut homeowners will qualify for the U.S. Treasury's refinance or loan modification program — or how many will even seek help — isn't yet known. But the new data for Connecticut, plus the unfolding complexity of the Obama plan, together highlight how deep the mortgage crisis has become and how difficult it will be to sort out.

Nationwide, it is hoped the Making Home Affordable program will help up to 9 million borrowers stay in their homes, either through refinanced loans or loans modified to lower monthly payments.

Some experts say matching the program with eligible borrowers won't be easy, but most experts agree that the program is the most decisive step taken to combat the foreclosure crisis and sinking housing values.

"It's going to turn out to be a very bureaucratic process," said Bert Ely, a banking consultant based in Alexandria, Va. "There are many folks that aren't going to qualify or want to jump through all the hoops."

The process can be daunting, especially for first-time homeowners or the elderly, who aren't familiar with how the mortgage market works.

In Hartford on Wednesday, ACORN, the housing activist organization, rallied outside the home of Willie A. Huguley on Cornwall Street, calling attention to the need for more help for those, like Huguley, who are facing foreclosure.

Huguley, now 73, refinanced the mortgage on her two-family house after her husband died in 2000. But she soon found the monthly payment on her adjustable-rate loan rose by more than $600 a month, and she quickly fell behind in payments. Now she faces the loss of the home where she has lived for decades.

Huguley said she's tried to keep up with the payments and has gotten help from family and friends.

"I've squeezed and squeezed," Huguley said. "I can't squeeze no more."

It isn't clear if Huguley will be helped by the new federal program, but she lives in a city that has 45 percent of its mortgages "underwater," meaning they exceed the value of the property.

ACORN also launched a new civil disobedience program in Hartford designed to block lenders from removing homeowners under foreclosure until Congress considers all foreclosure prevention efforts, including giving bankruptcy judges power to modify mortgages.

House Democrats agreed Tuesday to narrow proposed legislation that gives bankruptcy judges the power to change the terms of mortgage loans for debt-strapped borrowers.