Mortgage relief initiative growing

Including local banks in the area By Owen Boss BOSTON — In response to a record high foreclosure rate, the Federal Reserve Bank of Boston and the Massachusetts Bankers Association recently announced that the Mortgage Relief Initiative introduced in December is now growing from its initial five banks to include more than 50 banks of varying sizes, with branches throughout Massachusetts and much of New England. One local bank participating in the new initiative is the Colonial Co-operative Bank on City Hall Avenue in Gardner. Bank Vice President and Chief Loan Officer Susan Monette said that she is excited to a part of the program because it is in the best interest of the local community and the bank to get these homeowners back on their feet. “It’s a win-win for everyone; we would like to be considered part of the solution as opposed to part of the problem, and what better way to solve these issues than speaking to the customers one on one to see what we can do for them,” said Ms. Monette. “With this initiative, we may not be able to help everyone, but we will be able to get the people we can’t help the number of an agency that can get them the assistance they need.” Ms. Monette also said that the high foreclosure rate is not because banks are interested in acquiring these houses, and that it would be a better situation for the banks if these residents were able to make their payments. “These foreclosures aren’t good for anyone,” said Ms. Monette. “Banks don’t want to own property — that isn’t what we are in the business for.” So-called “subprime” foreclosures were credited with helping more Americans than ever afford houses during the housing boom earlier in the decade. However, because the payments for these loans typically rise sharply two years after they start, more homeowners are now having a hard time making their payments. In 2007, lenders filed more than 20,000 foreclosure notices against Massachusetts homeowners, which surpassed the previous record of 17,000 in 1991. Joel Werkema, assistant vice president of the Federal Reserve Bank of Boston, said the expansion of the initiative to include more local banks was always part of the original plan, it was just a matter of timing. “This effort, when it started, wasn’t necessarily limited to the large banks in Boston, it just so happened that we were able to start with them. The initiative started with conversations between our president and these institutions and we just ended up putting something together,” said Mr. Werkema. “Particularly because we were working closely with the Mass Bankers Association, we knew we would expand this service to include local banks, we just wanted to get our sea legs under us with the original five because it was all new to us.” In addition to the expansion of the initiative, it is also evolving — the original plan was to reach out to borrowers with high-rate, subprime loans who may be eligible for a more secure, predictable, affordable mortgage from a bank. However, falling home prices in many parts of New England have eroded home equity. As a result, some borrowers’ homes are now worth less than their loans, and refinancing into a new mortgage can prove to be difficult. According to a press release, Daniel Forte, president and CEO of the bankers association said, “There is no single easy answer. Banks did not cause this problem, but the mortgage relief banks, regardless of their size, want to be part of the solution. They have a stake in the success of both the local and regional economy.” Lynn Browne, executive vice president at the Federal Reserve Bank of Boston, said although this initiative is a sign that banks are working toward doing everything they can to help homeowners, there are situations that merit outside help. “The biggest challenge we have encountered is that declining home prices have left many of the target borrowers underwater in terms of their home equity,” said Ms. Brown. “And those loans are just incredibly difficult for these lenders to arrange.” Jon Skarin, acting director of federal regulatory and legislative Policy for the bankers association, said that the inclusion of smaller local banks in this initiative will allow for more widespread support. “This is an opportunity for community banks to step up to the plate and help out in the same manner that these larger banks have,” said Mr. Skarin. “Getting smaller community banks involved will ensure a personalized approach to solving some of these problems, and so far we have been very happy with the results.” oboss@thegardnernews.com Appeared on Page 1 on 6/12/2008 (Vol. 206 No. 139)