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State urges struggling homeowners to seek mortgage help

Homeowners having difficulties due to adjustable-rate mortgages should obtain aid to avoid foreclosure.

HARRISBURG — Nearly 25,000 Pennsylvania homeowners will face higher home payments in 2008, according to state banking regulators who urged people to seek help if they have adjustable-rate mortgages they cannot afford.

Homeowners with adjustable-rate mortgages should call their lender as soon as possible to determine whether their interest rate will increase — and, if so, by how much, state Banking Department officials said Friday.

Lenders typically say they will try to rework the loan terms, but many people who end up in foreclosure have not sought such help, officials said.

“A lot of people avoid calling the bank or the lender because they don’t trust them. They think the bank is just trying to take their house,” department spokesman Daniel Egan said.

But banks and other lenders also have a lot at stake in avoiding foreclosures, he said.

“They want to avoid foreclosures as much as the borrower,” Egan said. “They don’t want a bunch of properties on their hands in a weak real estate market.”

Responsible banks and lenders will work out a payment plan, said Daniel J. Reisteter of the Pennsylvania Bankers Association.

Homeowners who do not know what to say to their lender can call the department’s consumer services division, 800-PA-BANKS. The state also has programs to help homeowners avoid foreclosure, including the Homeowners’ Emergency Mortgage Assistance Program, Refinance to an Affordable Loan and the Homeowner Equity Recover Opportunity.

In Pennsylvania last year, there were 34,089 foreclosures, or one in every 159 of the state’s 5.25 million households. That figure dropped from 38,333 foreclosures in 2006, but was well above the 28,650 in 2005, according to statistics from RealtyTrac Inc. in Irvine, Calif.

The percentage of households affected was highest in Philadelphia, at 0.86 percent.

This year, more adjustable-rate mortgages will reset to higher interest rates than occurred last year, meaning more people could be facing a fight to keep their home, Egan said.

However, struggling homeowners may have a more difficult time refinancing to a more stable fixed-rate mortgage since credit markets worldwide seized up last year. In addition, federal officials have encouraged banks to adopt more conservative lending practices in the aftermath of the soaring mortgage defaults that led to the credit crunch.

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