“That has all changed.”

From the Hartford Courant:

Thousands To Feel Mortgage Pain

Dawn Fuller-Ball bought her South End condo in March and she’s already in trouble. Despite holding down two jobs, Fuller-Ball is having a hard time paying her bills.

Her mortgage broker had told her that despite blemishes on her credit record she could get a loan with no down payment.

When she didn’t have enough in her savings to qualify for a mortgage, the broker told her not to worry – she could just borrow some from her family, put it temporarily in her account and pay it back after the closing.

“I only qualified by the skin of my teeth,” Fuller-Ball said.

What the 41-year-old first-time homebuyer says she did not fully understand is that she qualified for the loan only because other liabilities as tuition bills, car payments or condo fees were not included when her loan was put together.

Fuller-Ball was sold a subprime mortgage – one that does not meet traditional underwriting standards. Community activists say many of them are predatory loans, made by fee-seeking sharks who either lied about conditions of the loan or did not care whether borrowers understood what they meant or whether they could ever pay them back.

“It is kind of a scary thing. We are seeing people who haven’t had a mortgage for a year and they are already in trouble. Who gave them a loan?” asked Susan Harkett-Turley, executive director of the Housing Education Resource Center in Hartford.

Those expected to be hit the hardest are the working poor and minority residents living in urban areas such as Hartford, where legal actions against residential homeowners – commonly the prelude to foreclosure – doubled in the second quarter of 2007 over the second quarter of 2006.

“This could wipe out a whole generation of homeownership opportunities,” said Bob Kantor, lead director of the New England community development division of Fannie Mae.

Until about 15 years ago, about 80 percent of all mortgages in Connecticut were written by mortgage banks, which demanded verification of income, proof of savings, a good credit rating and an appraisal of the home that was at least 5 percent more than the value of the loan. Such “prime” loans were then sold to federally backed security companies like Fannie Mae and Freddie Mac, which sold them to investors.

But in the past few years, Kantor said, the mortgage lending landscape in Connecticut totally reversed, with 80 percent of mortgages written by brokers, many of whom did not adhere to stringent lending standards. These brokers sold unregulated subprime loans to private investors who, because of rising housing prices, were not concerned about risks. After all, borrowers could simply refinance the worst of the loans and nobody would lose money.

That has all changed.

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