Foreclosures expected to spike in 2010

Foreclosure activity in New London County, which took a breather for much of 2009, appears to be poised for another spike this year.

Foreclosures were up 45 percent in December compared with the same period a year before, according to new figures provided Tuesday by The Warren Group, publisher of The Commercial Record. And filings in anticipation of future foreclosures rose nearly 40 percent over the same period.

"People are so desperate," said Barbara Crouch, who regularly counsels local people in crisis through Catholic Charities, the only federally approved housing-counseling agency in the area.

"We are getting inundated with phone calls - much higher than over the last few months," said Jay Gelfond, a housing counselor for Catholic Charities in Norwich who also works regularly at the organization's New London offices on Huntington Street. "Our biggest sector is delinquency counseling. It's definitely rising."

Gelfond said Catholic Charities gets 25 to 40 calls a day looking for help, and he refers people who call to twice-a-month foreclosure-intervention programs at Catholic Charities. He plans to sit down with 17 people in crisis this week - which he said was a relatively slow period of late - to talk in-depth about mortgage problems.

Don Klepper-Smith, head of the Governor's Council of Economic Advisors, said in a phone interview that he wouldn't be surprised if 2010 turns out to be another big year for foreclosures in Connecticut. Nationally, he said projections call for 2.4 million foreclosures this year compared with 2 million last year.

The rise in foreclosures, he said, is tied to an expected spike in loan resets for adjustable-rate subprime mortgages - the once-popular financial devices whose misuse caused a housing bubble from which the state is just starting to recover.

"We're not going to get moving forward in the right direction in the housing market until we get job growth," Klepper-Smith said.

Despite the foreclosure spike at the end of 2009, the total number of foreclosures last year fell 31.6 percent in the region, a reduction that experts tied to various efforts - both statewide and nationally - to try to forestall losses of homes through mediation and mortgage-term adjustments.

For instance, figures from the state judicial branch show, in a little over a year, more than 2,700 people avoiding foreclosure through a statewide mediation program. Individual banks also are offering mortgage forbearance programs, and there are other forms of help through the Connecticut Housing Finance Authority, the national Home Affordable Modification Program and others.

The fatal flaw with the much-maligned HAMP, said Crouch, is that it assumed people could afford their homes if only given a lower, market interest rate in the 4 percent range. But many mortgages, she said, still wind up costing homeowners an unmanageable 40 percent of their income, even with the reduced loan costs, which mean that many people are not getting help from HAMP.

"What do you do? The money's just not there, and there's really nothing you can do," she said.

Gelfond, the housing counselor, said many people make the mistake of waiting too late before they seek help on their mortgage, or they go to someone who takes money for "guaranteeing" loan modifications that only a lending institution can approve.

But he estimated that well over 80 percent of the people he sees are able to get free help from Catholic Charities, which he said is the only federally approved housing counseling agency in New London County.

Gelfond said many people are being helped by the state's CT FAMLIES program, which has been changed to allow those in the beginning stages of crisis to gain loan modifications. Previously, Crouch said, the program had been geared only toward those with current credit problems.

"Not everyone gets 2 percent mortgages," Gelfond said. "We don't want to give false hope."

Adding to the problems, many homes are now worth much less than what they did a few years ago. And many homeowners have so many credit-card debts that they find it difficult to qualify for mortgage modifications until they find a way to lower those monthly costs.

"With some people, there's just not much we can do," he said.