From the Asbury Park Press:
Proponents had once touted subprime loans as a way for some consumers to afford the American dream of homeownership.
Yet new government data now show a nightmare scenario that economists have suspected: that most of the borrowers with low credit scores turned their homes into a virtual credit card.
Monmouth and Ocean counties led the nation last year in the percentage of borrowers extracting cash from their houses, usually through refinancing or home equity loans.
A staggering seven out of 10 high-risk borrowers in both counties — those with low credit scores — refinanced loans to obtain extra cash, Federal Reserve data for the end of 2007 showed. Those are the highest percentages in the nation among large counties with more than 2,000 subprime loans. New Jersey had five counties in the top 25.
Such mortgage debt will continue to weaken the housing market at the Shore and around New Jersey this year, experts and consumer advocates say.
“It’s no secret that we live in a credit-dependent society,” said Brett Lopes, vice president of Intercounty Mortgage in Hazlet. “In the same way that people don’t handle credit cards correctly, they perceived their house was worth more and more and they used it like a credit card.”
Forty percent of the 10,800 subprime loans provided to homeowners in Monmouth and Ocean counties were given without full documentation of income, and the average credit score was about 610, far below the top score of 850.
Forty percent of subprime borrowers at the Shore are also behind on their loan payments. Eleven percent are in foreclosure.
The nearly 79,973 subprime borrowers in New Jersey owe an average of $250,614 on their loans, the fifth highest balance in the United States. That’s about $20 billion in subprime loans.
There were 12,376 foreclosure lawsuits filed in New Jersey Superior Court in the first three months of this year, state officials said Friday. If foreclosures continue at that rate for the year, there would be nearly 50,000, double the number from just two years ago.
Foreclosure lawsuits are usually filed after homeowners have missed several payments.
There were 36,358 foreclosure lawsuits filed in state Superior Court last year, up by 46 percent from 2006, according to state data.
In Monmouth and Ocean counties, 5,102 foreclosure lawsuits were filed last year, up 42 percent from 2006. Local figures for 2008 were not immediately available.