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HARTFORD-Gov. M. Jodi Rell has taken the first step in ascertaining the true depth of the subprime mortgage-lending problem in the Nutmeg State. Rell says she will convene a task force to examine the issue and make recommendations on how to address the subprime-lending problem in the state. According to state officials, there are $8.1 billion in subprime loans outstanding, with approximately 10% or $810 million past due.

“Over the past few years there has been a huge increase in adjustable rate mortgages that featured low initial rates for a few years, but were then adjusted upward, often doubling or tripling monthly mortgage payments,” Rell states. “As a result, a significant and increasing number of these mortgages are currently in foreclosure and many families are facing hardship and possibly the loss of their homes.”

Rell says the state needs to learn the scope of the problem and how best to help affected homeowners. “Many lenders wrote mortgages requiring no down payment, using less stringent underwriting criteria than traditional mortgages. For many homebuyers with past credit issues, these sub-prime mortgages were their only path to homeownership. Many planned to re-finance to conventional, fixed-rate mortgages when their homes appreciated in value. Unfortunately, homes did not increase in value in many Connecticut markets,” she notes.

Connecticut Banking commissioner Howard Pitkin and Gary King, president of the Connecticut Housing Finance Authority will co-chair the task force. The governor has invited officials from the Connecticut Department of Banking, the Department of Consumer Protection, the Federal Housing Administration, Veterans Administration, Housing and Urban Development, Federal National Mortgage Association, FreddieMac, the Connecticut Mortgage Association, the Connecticut Bankers Association, Realtors, brokers and mortgages lenders to help the task force define the extent of Connecticut’s problem. State officials say the group will hold its first meeting the first week of May.

The task force is charged with completing a definitive analysis of the entire subprime lending issue, including the number of families currently holding sub-prime mortgages, the number in foreclosure, the opportunities for re-financing, and what kind of assistance or guidance may be available to affected families, state officials say.

Connecticut’s US Sen. Christopher Dodd has held hearings on issue of subprime lending as chairman of the Banking, Housing and Urban Affairs Committee. The governor expects the work of the state task force to complement the efforts being undertaken by Dodd.

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