State officials fear that the national credit crisis is only starting to emerge in Vermont.
They hope a new Federal Housing Administration program will help homeowners whose variable rate mortgages are suddenly more expensive.
VPR’s Ross Sneyd reports.
(Sneyd) No one keeps track of how many Vermonters were enticed into buying a house through “teaser’’ loan rates.
Those were low interest rates designed to entice people to take out a loan.
But the teaser rates promoted by subprime lenders aren’t good for the life of the loans. Instead, they’re adjustable rate mortgages whose interest charges can climb after the introductory period.
And that’s just what’s begun to happen to many homeowners who otherwise have good credit.
As their payments rise by hundreds of dollars a month, they fall behind and now face the prospect of losing their home.
Opportunities Credit Union, a non-profit in Burlington, has a staff of housing counselors who work with people to get them out of such a financial jam.
Caryl Stewart is CEO of the credit union and she says her staff is about to get busier.
(Stewart) “ So our view is that this is going to emerge more and more and more as these low adjustable rates hit their first date of readjustment. And it’s still somewhat early in the game. But we anticipate this to become a fairly large issue.”
(Sneyd) Mortgages can be complicated. So Stewart worries that many people who got the adjustable rate mortgages may not know it – or may not know when and by how much their rates could rise.
So Stewart advises people to dig out their mortgage papers and read them.
If they’re confused – or frightened – credit counselors might be able to help.
(Stewart) “It’s not a slam dunk. We’re not promising: Bring your mortgage in and we’ll fix it. Bring your mortgage in and we will help you really understand what you’ve gotten yourself into and what the best way is for you to proceed.”
(Sneyd) One of the things counselors might start advising is simple: refinance.
The U.S. Department of Housing and Urban Development has unveiled a new refinancing program called FHA Secure.
Taylor Caswell is regional director of HUD. He says the new plan should help people who were able to keep up with their payments until their interest rates adjusted sharply upward.
(Caswell) “So with this they’d be able to refinance using an FHA insured loan and be able to include any arrearages and some other pieces to it that really make it an attractive product and something that we think is really going to help a lot of people in a tough situation.”
(Sneyd) Caswell says borrowers should contact their lender first when they run into difficulties.
If that doesn’t help, he says, certified credit counselors can probably help.
For VPR News, I’m Ross Sneyd.