Government leaders vowed to stay ahead of the national mortgage crisis predicted to overwhelm cities like New Haven over the next year.
At a City Hall press briefing, Mayor John DeStefano (pictured) announced that he’s formed a task force to study how New Haven’s “subprime” mortgages and other troubled housing loans match up with the national trends. Board of Aldermen President Carl Goldfield announced that his colleagues have initiated their own study and plan to hold hearings next month.
The growing number of U.S. defaults has already led the national economy to the precipice of recession, and even affected international markets and foreign governments. They’re the result of aggressive marketing of loans to families with low incomes and/or poor credit. The loans often look cheap but contain poisonous terms in the fine print, terms that kick in later.
(Click here to read about action President Bush announced Monday.)
The reason that experts believe the worst is yet to come: 2006 saw a record number of adustable-rate subprime mortgages, which start out with low interest rates then leap to high levels two years later.
As in 2008.
New Haven already saw the first signs of the crisis this year. By one recent count 1,150 New Haven homes were in foreclosure; legal actions against homeowners jumped 85.1 percent from the second quarter of 2006 to the second quarter of 2007. The Independent has begun telling the stories of people affected by the crisis here, here, here and here.
Goldfield (pictured) said at the Wednesday press briefing that the aldermen’s concern is threefold: the crisis’s impact on families losing homes; on tenants whose landlords lose buildings; and on neighborhoods blighted by abandoned homes. He spoke of the drag on neighborhoods by houses abandoned during the last recession in the early 1990s. And he spoke of how on his own street — Roydon Road, in middle-class Beaver Hills — four houses have remained for sale in a “very slow market.” One house, bought by an out-of-state investor, is empty.
Goldfield, who’s an attorney, said that in general subprime lenders took advantage of families who didn’t know better. “I see some of the loans in my practice. It would take me 45 minutes of concentration” to figure out the terms as written.
DeStefano cautioned that the face of New Haven’s fallout may differ from the national picture. The city’s percentage of home ownership hasn’t risen dramatically over the past decade, he noted; a lot of the new housing that came online has been rental. So, while in other communities the big story may be people losing single-family homes, here it may involve more absentee landlords with multi-families.
Both he and Goldfield spoke of using the next few months to gather data to form an accurate picture based on which to tailor remedies — how to help renters in some cases, financially strapped homeowners in others.
“I want to see numbers. We all have perceptions,” DeStefano said. “I don’t want to go with a solution in search of a problem.” One fear he expressed: dealing with a wave of absentee landlords walking away from buildings owned by out-of-stae investers with loans from “banks in Miami.”
There are currently about 4,000 subprime mortgages in the city, DeStefano said, citing State Department of Banking numbers. Click here for information on a new report on subprime mortgages by a gubernatorial task force.
In its public hearings next month, aldermen also hope to look at other communities’ responses to the crisis — programs to help people keep their homes for instance. Goldfield cited a project in which not-for-profit groups may buy homes in foreclosure and rent them back to the families who owned them. Another idea he floated: Have Yale Law School volunteers help families defend themselves in court against foreclosure.
“We don’t want people picking up in the middle of the night,” he said. “The tendency when the sheriff comes to the door is to think you have no options.” Sometimes that’s true, he said. Sometimes it’s not.
The mayor’s subprime task force, meanwhile, plans to convene this month. Its members include the Community Loan Fund’s Carla Weil, Jim Paley of Neighborhood Housing Services, Empower New Haven chief Althea Richardson, Bob Solomon of the Yale Law School Clinic and the city housing authority board, and three aldermen: Goldfield, Bitsie Clark, and Joseph Rodriguez, who takes office in January.
Read previous Independent coverage of New Haven’s foreclosure crisis:
‚Ä¢ Renters Caught In Foreclosure King’s Fall
‚Ä¢ She’s One Of 1,150 In The Foreclosure Mill
‚Ä¢ Foreclosures Threaten Perrotti’s Empire
‚Ä¢“I’m Not Going To Lay Down And Let Them Take My House”
The following links are to various materials and brochures designed to help homeowners avoid foreclosure.
How to prepare a complaint to the Department of Banking; Department of Banking Online Assistance Form; Connecticut Department of Banking, Avoiding Foreclosure; FDIC Consumer News; Statewide Legal Services of Connecticut, Inc; Connecticut Bar Association Lawyer Referral Service.
For lawyer referral services in New Haven, call 562‑5750 or visit this website. For the Department of Social Services (DSS) Eviction Foreclosure Prevention Program (EFPP), call 211 to see which community-based organization in the state serves your town.
Click here for information on foreclosure prevention efforts from Empower New Haven.