Connecticut Cities Hit Hard By Mortgage Foreclosures

RealtyTrac, a real estate tracking company has found that foreclosures have risen to alarming levels in Connecticut’s cities along with mortgage defaults, which have shot up dramatically in the last year, as house owners feel the burden of increasing sub-prime and predatory lending related costs.

The California-based real estate data provider said there was an increase of a solid 547% in the number of foreclosures for the New Haven-Milford area, an increase of around 522% for the Bridgeport-Norwalk-Stamford area, and the Hartford area saw a rise of 446 percent in just the first half of 2007, on a year to year basis when compared to 2006.

State Attorney General Richard Blumenthal was quoted by a local paper as saying that his office has been flooded with calls for help from homeowners. “We may be on the cusp of a huge wave breaking over Connecticut. People are very understandably upset” he said.

There will soon be a mortgage assistance program launched by the attorney general’s office which will give people help and advice, and provide information to borrowers about where they can get help.

This a nationwide problem. It has been seen that around 19% of the total sub-prime loans issued in 2005 and 2006 are going to end in default and will most likely end up in foreclosure, causing an estimated 1.7 million families to become homeless. A report was released to this effect by a non-profit research organization called the Center for Responsible Lending based in Durham N.C.

According to estimates by the Mortgage Brokers Association, 550,000 sub-prime loans saw foreclosure proceedings being started against them last year. Last week, another report released by the congressional Joint Economic Committee stated that close to two million sub-prime mortgages are likely to fall into foreclosure in the following 18 months.

A lot of pain has been caused to sub-prime borrowers due to an increase in their mortgage payments, which can often go up by hundreds of dollars per month, due to an increase in the interest rates on their ARM’s. Industry experts say that many did not anticipate this increase, thereby causing that much more damage.

Here, two schools of thought prevail. While a few experts say that sub-prime lending has been predatory and misleading, other experts say that hundreds of thousands of Americans have been able to fulfill their dream of buying their own home even though they would not have qualified for a traditional loan or get financing earlier.

Due to the severity of the crisis, Congress is considering implementing new laws to regulate the lending industry.

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