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Governor Eliot Spitzer Confronts Subprime Lending Crisis by Announcing $100 Million “Keep the Dream” Refinancing Program to Help At-Risk Families Keep Their Homes

Initiative Includes New Funding for Homeowner Counseling and Education

July 27, 2007

Governor Eliot Spitzer today announced the $100 million “Keep the Dream” refinancing program that will offer homeowners with risky mortgages the opportunity to refinance and avoid possible foreclosure.

The new program represents a major initiative of the multi-agency HALT Task Force (Halt Abusive Lending Transactions) that the Governor created in March to address the crisis in the subprime mortgage market.

Through partnerships with Fannie Mae, mortgage lenders, and mortgage insurance companies, the State of New York Mortgage Agency (SONYMA) will offer at-risk homeowners the ability to refinance their current mortgages with 30-year or 40-year fixed-rate mortgages at competitive interest rates.

“Homeownership is crucial to growing our economy throughout New York State,” said Governor Spitzer. “This innovative program will help address the foreclosure crisis by offering at-risk families mortgages they can afford, so they can keep their homes for years to come.”

President and Chief Executive Officer of SONYMA, Priscilla Almodovar, said: “Our mission at SONYMA is to help working class families buy their first home and keep their homes. That is why our ‘Keep the Dream’ program is so important?it will give families in danger of losing their homes the ability to refinance their mortgages and remain as homeowners.”

Banking Superintendent and Chair of the HALT Task Force, Richard H. Neiman, said: “By creating the HALT Task Force in March, the Governor was able to pull together the talent and resources from a diverse range of state agencies to develop and implement creative solutions to address issues facing consumers. With serious challenges remaining for both consumers and the mortgage industry, I am confident that this team will continue to make significant progress and lead much needed efforts in consumer protection and industry improvements.”

Home Counseling and Education

A crucial part of the “Keep the Dream” refinancing program will require eligible borrowers to complete a homeowner education course with a federally approved not-for-profit organization. Borrowers must also agree to participate in early delinquency intervention counseling should they become delinquent for 30 days or more on their refinanced mortgage.

To promote homeowner counseling, the New York State Division of Housing and Community Renewal (DHCR) will dedicate nearly $400,000 in Urban Homeownership Assistance Program grants to eight non-profit agencies located in cities with more than 60,000 residents. The non-profits will use the funding to offer financial counseling to homeowners, helping them avoid the pitfalls of predatory loans and foreclosure proceedings.

Deborah VanAmerongen, Commissioner of DHCR said: “Not all subprime loans are necessarily bad. In some instances, they are a valuable tool for individuals who don't qualify for a prime loan. Our goal in providing counseling is to help consumers qualify for and obtain the best possible mortgage loan available.”

Assemblyman Vito Lopez, chairman of the Assembly Housing Committee who was the sponsor of the homeowner counseling initiative, said: “I am proud to partner with the Governor on this innovative project. The money we've dedicated will help families facing foreclosure and will go a long way in educating homeowners while also addressing the subprime loan issue all over New York State. I look forward to working on this issue with Governor Spitzer in the future and hope this is only the first step we take in protecting homeowners and their assets.”

In addition, SONYMA will make available another $250,000 from its revenues to help finance counseling services for homeowners participating in the “Keep the Dream” refinancing program.

Marian Zucker, Executive Vice President of SONYMA said: “Our goal in requiring counseling is to help homeowners increase their financial literacy and promote sustainable homeownership. We want borrowers to understand the risks and responsibilities of owning a home so they will remain homeowners.”

“Keep the Dream” Refinancing Program

The “Keep the Dream” refinancing program is designed for borrowers who have adjustable or interest-only mortgages where the interest rate has just increased or will increase in the near future. Eligible borrowers will have to demonstrate that they have experienced a mortgage payment hardship or will experience a hardship in the near future. Borrowers who are less than 60 days behind on their mortgage payments because of a payment increase may also be eligible for the program.

Refinancing loans can be as high as $417,000. Financing will be available for up to 100% of the value of the borrower’s property. Proceeds of the mortgage can be used to pay prepayment penalties, closing costs and pay off most second mortgages.

“Keep the Dream” is targeted for low-, moderate- and middle-income homeowners. Eligible borrowers can have incomes of up to 165% of the area median income in New York City, Long Island and the counties of Dutchess, Orange, Ulster, Westchester, Rockland and Putnam, and up to 125% of the area median income for the remainder of New York State.

These income ceilings will range from $58,120 in Allegany County to $82,870 in Albany County to $93,720 in New York City to $158,560 in Rockland County. Lenders in New York State will begin to offer SONYMA’s “Keep the Dream” mortgages starting September 4, 2007.

Creation of “Keep the Dream” was made possible through extensive public-private collaboration with several SONYMA partners. Fannie Mae, a federally chartered company, will issue mortgage backed securities that will be secured by these mortgages. Fannie Mae’s $100 million contribution is also an important part of the solution to the subprime problem.

SONYMA has also secured the participation of private mortgage insurance companies who will provide insurance for mortgages originated under the program. And SONYMA’s Mortgage Insurance Fund (MIF) has agreed to provide mortgage pool insurance on all the mortgages originated under the program.

The eight counseling agencies receiving funding from DHCR are:

  • Neighborhood Housing Services of the Northern Bronx
  • Ridgewood-Bushwick Senior Citizens Council
  • West Harlem Group Assistance
  • Neighborhood Housing Services of Jamaica
  • West Side Neighborhood Housing Services (West Side, Buffalo)
  • Neighborworks of Rochester
  • Northeast-Hawley Development Association (Northeast Syracuse)
  • Better Neighborhoods, Inc. (Hamilton Hill/Vale Cemetery, Schenectady)

To learn more about the “Keep the Dream” program, information is available at the SONYMA Homebuyers Hotline: 800-382-HOME (4663). Potential applicants who need immediate assistance can also contact the national HOPE line run by the Homeownership Preservation Foundation at 888-995-HOPE (4673).

SONYMA was created in 1970 with the mission of helping low- and moderate- income families become homeowners. It offers a variety of low down payment mortgages that provide below-market fixed interest rates, as well as closing cost assistance through a network of participating lenders across the state.

The Division of Housing and Community Renewal is one of America's oldest affordable housing agencies. Originally created within New York's Department of State in 1926, the Division of Housing administered the first Limited Dividend program and the first state-subsidized public housing program in the nation. Today, DHCR is responsible for the supervision, maintenance and development of affordable low- and moderate-income housing in New York State.

TheNew York State Banking Department is the regulator for all state-chartered banking institutions, virtually all of the United States offices of international banking institutions, all of the State’s mortgage brokers, mortgage bankers, check cashers, money transmitters and budget planners.  The aggregate assets of the depository institutions supervised by the Banking Department are more than $1.8 trillion.

In addition to regulating banking institutions, the Banking Department is active in informing and educating all New Yorkers on banking matters.  To contact the Banking Department, please call 1-877-BANK-NYS or visit our Web site at www.banking.state.ny.us.

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