States May Assist Subprime Borrowers

WASHINGTON—At least six states are in the process of setting up funds or are investigating establishing funds that would help homeowners who are locked into subprime mortgages. The funds would help those homeowners refinance into loans with more affordable payments. Maryland, Massachusetts, New Jersey, New York, Ohio and Pennsylvania are all expected to make such funds available to homeowners, with as much as $500 million in total dollars underwriting the funds. State officials said a one goal is to prevent vulnerable neighborhoods from deteriorating further as homeowners become unable to make payments because their mortgage has repriced. Giant secondary players Fannie Mae and Freddie Mac are involved in the discussions and would purchase the loans under some of the states’ plans. The Mortgage Bankers Association has forecast that more than one million U.S. homes will go into foreclosure during 2007, about 2.3% of the total. Sixty percent of those loans are subprime mortgages, the MBA said.