Early in campaign, Sununu, Shaheen both focus on mortgage crisis
CONCORD, N.H. --With about seven months to go until their November rematch, both Republican Sen. John Sununu and Democrat Jeanne Shaheen are emphasizing an issue that hits many voters particularly close to home.
Though New Hampshire's mortgage crisis is more muted than many states, the number of homes going through foreclosure has quadrupled in the last three years and continues to rise. Foreclosures rose steadily from about 500 in 2005 to just over 2,000 in 2007 and are expected to approach 3,000 by the end of this year.
Dean Christon, executive director of the New Hampshire Housing Finance Authority, said there are two main factors in the increase: the slowdown of the real estate market and the rise in subprime mortgages, made to borrowers who don't qualify for traditional loans, usually because of bad credit or low income. By the end of last year, subprime mortgages made up 12 percent of all mortgages in the state but 62 percent of all foreclosures. And because many subprime loans are based on adjustable rates that remain steady for a few years but then rise, the next few years are expected to be even worse.
"The theory is that as we go into '08 in particular, we're going to see even more of those loans come up for adjustment, and when that happens, payments go up, many times to an unaffordable level," Christon said. "They eventually have difficulty paying and eventually those loans go to foreclosure."
In hopes of bringing those numbers down, Sununu held one workshop this month and plans a second to match up struggling homeowners with federal and state housing agencies, counselors and lenders. Shaheen, meanwhile, has been touring neighborhoods hard hit by foreclosures and offering a range of short- and long-term fixes.
"We can take action to stem the foreclosure crisis and to help families keep their homes, and we can do that without bailing out irresponsible investors," Shaheen said. "But in order to do that we need a new direction."
Sununu, who defeated the former governor to win his first term in 2002, says he's known for years what direction the country was headed in on home financing and has been ahead of the curve in proposing solutions. As far back as 2003, he co-sponsored a bill to strengthen regulation of the huge government sponsored mortgage companies
"I recognized early on that it was important that we maintain strength, solvency and stability in the housing market," he said.
Sununu's critics point out the legislation has remained stalled in Congress. Meantime, Sununu has voted against legislation Shaheen argues would help hundreds of thousands of homeowners. Last month, he helped block a Democratic bid to let bankruptcy courts ease the burden on borrowers who can't make their mortgage payments. Shaheen supported the bill, which in addition to allowing bankruptcy judges to modify the terms of subprime mortgage entered into before Jan. 1, would have provided $4 billion to communities to buy and rehabilitate foreclosed homes.
Without mentioning her rival, she suggested Congress hasn't been quick enough.
"I think there has been a reluctance to recognize the ripple effect that the subprime lending crisis is having across the economy," she said.
Sununu said he voted against the bill because Democrats refused to let Republicans offer amendments on a range of issues, such as tax credits for home buyers. He also said letting bankruptcy courts rewrite mortgages would prompt lenders to tighten standards and raise interest rates.
"Pushing people into bankruptcy isn't going to solve the problem," he said. "Encouraging people to walk away from their mortgage could end up increasing mortgage rates for homeowners who have worked very hard to make their payments."
The two do share some common ground. Both support changes so that state housing finance authorities could cover refinancings of subprime mortgages instead of just new mortgages. Both support more counseling services for at-risk homeowners and stronger truth-in-lending rules.
Shaheen supports allowing Fannie Mae and Freddie Mac to back larger loans, which was part of the economic stimulus package Congress approved last month. But both candidates wish such changes had been tied to tighter regulation of the two lenders.
All of the above sounds good to George Helwig, director of education and counseling for the Concord Area Trust for Community Housing. He doesn't object to either candidate's positions, though, like Shaheen, he believes getting bankruptcy courts involved could help.
Helwig also thinks the candidates don't go far enough in two areas. One is requiring Fannie Mae and Freddie Mac borrowers to attend financial counseling before purchasing homes. The other is requiring crystal-clear disclosure of loan fees called "yield spread premiums," which are cash rebates paid to mortgage brokers by lenders.
"Why should someone pay more on a mortgage just because someone else wants to make more money?" he said.
Helwig praised Sununu's workshops, saying it's critical that at-risk homeowners seek help as soon as possible. Those who act early have many more options, he said, including the chance to refinance and keep adjustable rates low for several more years.
"When someone comes in three weeks before a (foreclosure) sale, there aren't a lot of options," he said. "Getting people to act sooner is one of the big challenges at this point."
Among the 40 or so people who attended Sununu's first workshop was a Bow man who refinanced his home three years ago with plans to sell it before the adjustable rate increased. The house has been on the market for seven months, and the $2,200 per month he was paying at 4.99 percent has increased to $5,300 a month at 10.42 percent.
"You just can't catch up with it," said the homeowner, who asked that his name not be used. "And these banks, their favorite line when you call them up and say, 'Gee, can we change this or do something,' is 'Just keep sending the payment, we'll get back to you.' And that's been going on since August."
After Sununu's office stepped in, the man said he is hopeful that his bank will let him refinance the loan. He expects the mortgage crisis, and the economy in general, to be a big issue in the election.
"I'm in business for myself so I have a little bit better chance to stay above board, but for somebody making wages and their house payment adjusts and their payment doubles, there's just no way they can catch up with it. There are people walking away from their homes. They have no choice," he said. "Somebody's got to work together and get the country back to helping each other." 