Chris ChristieGovernor

Kim GuadagnoLt. Governor

Richard J. Badolato Commissioner

Thousands of people around the countryhave achieved homeownership by

means of a residential mortgage loanclassified as “subprime.” Subprime lendinghas been an engine of growth in home salesand, for the most part, subprime borrowershave met their mortgage loan paymentobligations, and enjoyed their new homes.

Some subprime loans, however, proveimpossible for borrowers to honor over time.Some subprime lenders, and some loanofficers in the course of marketing subprimeloans, exploited borrowers – who may nowface delinquencies in payment orforeclosure.

If you feel you have been exploited by alender, contact the New Jersey Departmentof Banking and Insurance at 1-800-446-7467.

“Prime” and “Subprime” refers to theinterest rate and terms of the loan basedon the borrower’s credit history. Borrowerswith the highest credit scores and cleanestpayment histories present limited risk to thelender and are usually offered lowerinterest rates and placed in the “prime”market.

Borrowers with lower credit scores as aresult of events such as late payments, courtjudgments and bankruptcies present a higherrisk to the lender; and, therefore, areoffered higher interest rates and are placedin the “subprime” market.

“Prime” and “Subprime” Markets

Two or more 30-day delinquencies in thelast 12 months, or one or more 60-daydelinquencies in the last 24 months;

Judgment, foreclosure, repossession, orcharge-off in the prior 24 months;

Bankruptcy in the last 5 years;

A Fair Isaac Credit Corporation (FICO)credit score of 620 or below; and/or

A high percentage of debt compared toincome that may limit your ability to coverfamily living expenses after deductingtotal monthly debt-service requirementsfrom your monthly income.

How Do I Know ifI Have a Loan With“Subprime” Terms?

For More Information

A Homeowner’sGuide to

SUBPRIMESUBPRIME

Credit problems?Late Payments?

Debt?

NJ Department of Banking and Insurance1-800-446-7467 www.dobi.nj.gov

Borrowers may not be aware that they areplaced in the “subprime” market. If you haveone or more of the credit characteristics listedbelow, your loan may have “subprime” terms.

NJ Housing Resource Centerwww.njhousing.gov

NJ Housing and Mortgage Finance Agency1-800-NJ-HOUSE www.nj.gov/dca/hmfa/

Homeownership Preservation Foundation1-888-995-HOPE www.995hope.org

Know your FICO credit score;

Ask how you are evaluated as arepayment risk;

Learn all you can about the loan productyou choose, including interest rates andfees;

Know if your monthly payment willinclude taxes and/or insurance;

Check for rate reset terms or paymentincreases during the life of the loan;

Check for teaser rates or payments thatstart low but increase later;

Beware of terms permitting unlimitedincreases in payment amounts due;

Check for prepayment penaltiesapplicable to an early payoff.

1. When Shopping fora Mortgage Loan –Do Your Homeworkand Always Read theFine Print!

To avoid buying a loan product that may resultin future payment increases or other unfavorableterms that may make it difficult to meet thepayment schedule, you should:

Tips for Borrowers

Borrowers fall behind in payments for manylegitimate reasons. But, most homeowners indefault or facing foreclosure fail to call for helpthat could have avoided the problem. Your lenderor loan servicer needs to know as soon as possiblewhen a payment will be late. (Contact informationwill appear on your bill.)

Most loan servicers will readily discuss optionsother than foreclosure. Here are some of thesolutions that may be available to homeownersin delinquency or facing foreclosure, when theycall their lender or loan servicer:

Forbearance – An agreement to postponepayment until the borrower is able tomake other arrangements.

Reinstatement – A lump sum payment planmay bring an account up to date.

Repayment – You may obtain a newpayment plan that adds the delinquentfunds to future payments in affordableinstallments.

Refinancing – Another option may be toroll your debt, including the past dueamount, into a new loan with an extendedterm of years.

2. When Delinquent on Paymentsor in Foreclosure – Call YourLender or Loan Servicer!

If you are unable to make new arrangements withyour lender or loan servicer, you should seek helpfrom legal counsel or from a certified creditcounselor and/or licensed debt adjuster.

If you choose an attorney, make sure he or shehas foreclosure experience and understands aborrower’s rights under the New Jersey FairForeclosure Act.

It is important to check that your loan officer is licensed by the Department or otherwise qualified. Use the Department’s Licensee Search online at www.dobi.nj.gov.

For a list of governmental and non-profitentities, including certified credit counselorsand/or licensed debt adjusters that mayprovide financial assistance or counseling, visitthe Department’s web site at:

www.state.nj.us/dobi/division_consumers/

Avoid “foreclosure specialists” promising tokeep you in your home. They are not licensed byDOBI, charge excessive fees, and provide servicesthat may not actually help you avoid foreclosure.

Avoid “lease/buy-back” deals in which you areasked to sell your house to an investor for a dollaramount equal to the balance due on yourmortgage. Typically, after you hand over yourtitle, you enter into a lease with the investorproviding that you, now as a tenant, will have theoption to buy back the house at the end of thelease period. In many cases, however, the rent isexorbitant, the tenant cannot pay and is evictedfrom the property; in others, the buy-back optionprice is set so high that the tenant is unable toafford it. The investors may stop making their ownmortgage payments on the property, and it couldbe foreclosed upon. In all of these cases, you asthe original homeowner, lose your home andwhatever equity you had in it.

3. Don’t Fall Prey to ForeclosureAssistance Scams!