President Bush's latest attempt to ease financial pressures on subprime borrowers may be too little & too late for many NJ homeowners.
Late last week,The Federal Reserve Bank of New York released some sobering numbers that update the problems of subprime mortgages in New Jersey.
According to The Record:
Nine percent of more than 63,000 securitized adjustable rate subprime loans in the state were in foreclosure in August, according to the first-of-its kind report to track the condition of loans given to non-prime borrowers in New York and New Jersey.
Nine percent of 63,000 loans represents about 5,670 homes in foreclosure.
Payments on only 67 percent of the loans -- which totaled $16.5 billion in outstanding balances -- were up-to-date.
"More than 30 percent in arrears is a striking number," said Keith Gumbinger, vice president of HSH Associates in Pompton Plains, a publisher of financial information.
According to the report, the typical subprime adjustable rate borrower in New Jersey borrowed $262,000 and started out paying an interest rate of 8.12 percent. But after the rate adjusts over time they would pay about 11.42 percent on average over the life of the loan, the report said.
The foreclosure rate on subprime adjustable rate loans nationwide was 7 percent, compared with New Jersey's 9 percent.
For loans on homes in Newark, 14 percent were in foreclosure and 13 percent were 60 or more days past due.
Adjustable rate subprime loans are among the types of loans most likely to go bad because borrowers often have had trouble with debt in the past and because their monthly payments will rise over time. And in a real estate market where home prices are falling, it is often impossible for financially distressed borrowers to refinance or to sell at a price that would pay off the balance of the mortgage.
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