SUBPRIME by pengtt


									                                                    Credit problems?
                                                                       How Do I Know if
  T   housands of people around the country         Late Payments?
      have achieved homeownership by                                   I Have a Loan With
means of a residential mortgage loan                                   “Subprime” Terms?
classified as “subprime.” Subprime lending
has been an engine of growth in home sales
and, for the most part, subprime borrowers
have met their mortgage loan payment                Borrowers may not be aware that they are
obligations, and enjoyed their new homes.       placed in the “subprime” market. If you have
                                                one or more of the credit characteristics listed
  Some subprime loans, however, prove           below, your loan may have “subprime” terms.
impossible for borrowers to honor over time.
                                                        Two or more 30-day delinquencies in the
Some subprime lenders, and some loan
                                                         last 12 months, or one or more 60-day
officers in the course of marketing subprime
                                                         delinquencies in the last 24 months;
loans, exploited borrowers – who may now
face delinquencies in payment or                        Judgment, foreclosure, repossession, or
foreclosure.                                             charge-off in the prior 24 months;
  If you feel you have been exploited by a
lender, contact the New Jersey Department
                                                        Bankruptcy in the last 5 years;            A Homeowner’s
                                                        A Fair Isaac Credit Corporation (FICO)
of Banking and Insurance at 1-800-446-
7467.                                                    credit score of 620 or below; and/or          Guide to
                                                     A high percentage of debt compared to
   “Prime” and “Subprime” Markets                     income that may limit your ability to cover

  “Prime” and “Subprime” refers to the
interest rate and terms of the loan based
                                                      family living expenses after deducting
                                                      total monthly debt-service requirements
                                                      from your monthly income.
on the borrower’s credit history. Borrowers
with the highest credit scores and cleanest             For More Information
payment histories present limited risk to the
lender and are usually offered lower              NJ Department of Banking and Insurance
interest rates and placed in the “prime”          1-800-446-7467      
                                                  NJ Housing Resource Center
   Borrowers with lower credit scores as a                       
                                                                                                                  Chris Christie
result of events such as late payments, court
                                                  NJ Housing and Mortgage Finance Agency                              Governor
judgments and bankruptcies present a higher
                                                  1-800-NJ-HOUSE                     Kim Guadagno
risk to the lender; and, therefore, are
                                                                                                                  Lt. Governor
offered higher interest rates and are placed      Homeownership Preservation Foundation
                                                                                                                 Tom Considine
in the “subprime” market.                         1-888-995-HOPE                   Acting Commissioner
       Tips for Borrowers

1. When Shopping for                                  2. When Delinquent on Payments                            For a list of governmental and non-profit
a Mortgage Loan –                                     or in Foreclosure – Call Your                           entities, including certified credit counselors
                                                                                                              and/or licensed debt adjusters that may
Do Your Homework                                      Lender or Loan Servicer!                                provide financial assistance or counseling, visit
and Always Read the                                                                                           the Department’s web site at:
Fine Print!                                             Borrowers fall behind in payments for many  
                                                      legitimate reasons. But, most homeowners in
   To avoid buying a loan product that may result     default or facing foreclosure fail to call for help
                                                      that could have avoided the problem. Your lender        If you choose an attorney, make sure he or she
in future payment increases or other unfavorable                                                            has foreclosure experience and understands a
terms that may make it difficult to meet the          or loan servicer needs to know as soon as possible
                                                      when a payment will be late. (Contact information     borrower’s rights under the New Jersey Fair
payment schedule, you should:                                                                               Foreclosure Act.
                                                      will appear on your bill.)
      Know your FICO credit score;
                                                        Most loan servicers will readily discuss options
      Ask how you are evaluated as a                 other than foreclosure. Here are some of the          3. Don’t Fall Prey to Foreclosure
       repayment risk;                                solutions that may be available to homeowners         Assistance Scams!
                                                      in delinquency or facing foreclosure, when they
      Learn all you can about the loan product       call their lender or loan servicer:
       you choose, including interest rates and                                                               Avoid “foreclosure specialists” promising to
       fees;                                                 Forbearance – An agreement to postpone        keep you in your home. They are not licensed by
                                                              payment until the borrower is able to         DOBI, charge excessive fees, and provide services
      Know if your monthly payment will
                                                              make other arrangements.                      that may not actually help you avoid foreclosure.
       include taxes and/or insurance;
                                                             Reinstatement – A lump sum payment plan          Avoid “lease/buy-back” deals in which you are
      Check for rate reset terms or payment
                                                              may bring an account up to date.              asked to sell your house to an investor for a dollar
       increases during the life of the loan;
                                                                                                            amount equal to the balance due on your
      Check for teaser rates or payments that               Repayment – You may obtain a new              mortgage. Typically, after you hand over your
       start low but increase later;                          payment plan that adds the delinquent         title, you enter into a lease with the investor
                                                              funds to future payments in affordable        providing that you, now as a tenant, will have the
      Beware of terms permitting unlimited                   installments.                                 option to buy back the house at the end of the
       increases in payment amounts due;                                                                    lease period. In many cases, however, the rent is
                                                             Refinancing – Another option may be to
                                                                                                            exorbitant, the tenant cannot pay and is evicted
      Check for prepayment penalties                         roll your debt, including the past due
       applicable to an early payoff.                         amount, into a new loan with an extended      from the property; in others, the buy-back option
                                                              term of years.                                price is set so high that the tenant is unable to
    It is important to check that your loan officer                                                         afford it. The investors may stop making their own
 is licensed by the Department or otherwise             If you are unable to make new arrangements with     mortgage payments on the property, and it could
 qualified. Use the Department’s Licensee             your lender or loan servicer, you should seek help    be foreclosed upon. In all of these cases, you as
 Search online at                     from legal counsel or from a certified credit         the original homeowner, lose your home and
                                                      counselor and/or licensed debt adjuster.              whatever equity you had in it.

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