Gregoire orders study of risky mortgages
OLYMPIA – Although the numbers of risky loans, defaults and foreclosures in Washington are far lower than in most of the nation, Gov. Chris Gregoire wants a group of bankers, advocates and regulators to see what the state can do to help people struggling to keep up with rising monthly payments.
“In terms of delinquencies with regard to mortgages we’re 47th, and with regard to foreclosures, we’re 49th in the country,” she said. Nonetheless, she said she remains worried that Washingtonians will lose their homes to adjustable-rate mortgages they cannot afford.
Among other things, the panel will look at ways the state can facilitate “sensible refinancing options from responsible lenders,” Gregoire said Monday in a meeting with reporters at the state Capitol. She said she wants recommendations by the end of the year.
Among the other things the group will look at:
•how big the problem is – and will be in the future;
•how the state can educate home buyers about the risks of subprime mortgages;
•how to help aspiring home buyers find a mortgage they can afford;
•and potential reforms for Washington’s lending laws.
Scott Jarvis, head of the state Department of Financial Institutions, said that the percentage of subprime loans in Washington is less than half the national average. In the worst cases, he said, there are states where a quarter of all mortgages are such loans.
Also, housing prices here remain high, which is good for those homeowners.
“Having said that, there are people who are going to be hurt,” he said. The state must educate them about their options, he said, and encourage lenders to renegotiate loans so people can keep their homes.
It’s also critical, Gregoire said, for Washingtonians to understand the state’s good economic condition. It would be a mistake, she said, to assume that the subprime mortgage woes of Michigan, Ohio or California are happening here in Washington.
“First and foremost, I think our role is to educate,” Gregoire said. The state doesn’t regulate most of the banks that have made the subprime loans, she said. That’s done by federal regulators.
In cases where borrowers were deceived about the terms of the loan, Jarvis said, his enforcement agents, the attorney general’s office and local prosecutors can often go after lenders under Washington’s mortgage-fraud law. About two dozen people have been prosecuted in such cases recently, he said.
“Surprisingly, some people didn’t even know they even purchased an adjustable-rate mortgage,” he said.
Jarvis said his agency is also taking out radio, print and movie-screen ads in low-income areas of the state, warning people that their monthly payments could rise sharply. In many of the mortgages, property tax and homeowners’ insurance aren’t included with the mortgage payment, as they are in most traditional mortgages.
“It’s like when you buy a car. You’ve got insurance that goes along with it, you’ve got to put oil in the car to make sure it runs,” Jarvis said. People have to set aside money for those extras, he said.
“A lot of people didn’t do that, and they’re the ones that are at risk now,” he said. “… There is some help for a lot of them, and we’re going to try and help them.”