Sep 13, 2007 5:37 pm US/Pacific
Mortgage Crunch: Millions Fearing Foreclosure
GREENWICH, Conn. (CBS News) ―
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A group of borrowers and activists went to confront Carrington last week at its offices in Los Angeles and Greenwich, Conn.
CBS News
For Alvin and Debbie Clavon of Los Angeles, the letter from their mortgage lender came last month and the news was bad.
"The interest rate went from 6.5 percent and it's now at 9.5 percent," Debbie Clavon said.
So the payments on their $275,000 mortgage have soared from $1,450 to $2,243 a month.
"We're burning through savings like crazy just to survive," says Alvin. "We're facing the prospect of foreclosure," adds Debbie.
The problem for the U.S. economy is that the Clavons aren't alone, and the worst is yet to come, reports CBS News correspondent Anthony Mason. Over the next year, at least 4.5 million homeowners with adjustable rate mortgages will see their payments skyrocket.
Economist Mark Zandi of Moody'sEconomy.com predicts: "Almost half of these homeowners will ultimately be unable to hold onto their home. They just aren't up to making these higher mortgage payments."
The Clavons admit they didn't read the terms of their loan carefully enough, and when Alvin was laid off from his job in personnel management for eight months, refinancing was impossible.
What's more, their lender, New Century, went bankrupt and a company called Carrington bought their loan.
But the Clavons say, "They really don't want to talk to us. They're being very standoffish."
So Alvin Clavon was among a group of borrowers and activists who went to confront Carrington last week at its offices in Los Angeles and Greenwich, Conn. Music teacher Al Ynigues came all the way from Apple Valley, Minn., because payments on his home have jumped almost $800.
"You want Carrington to renegotiate?" asks Mason.
"That's correct," says Ynigues.
"And if they don't, what happens to you?" asks Mason.
"I'll go into foreclosure or bankruptcy," says Ynigues.
But Carrington would not talk to them or to Mason, not responding to repeated requests for an interview.
Mortgage companies may not be used to the foreclosed fighting back, but more than a protest rally, this is an expression of desperation.
"I'm not asking for help because my husband lost his job and because we were dumb when we got the loan and didn't read," says Debbie Clavon. "What I'm saying is that this is a crisis in America and we need assistance."
The Federal Reserve has taken the extraordinary step of urging lenders to cut or postpone payments for cash-strapped borrowers.
"We're now to a point where this is a significant enough problem that is going to effect everybody. It's going to affect the broader economy. And," says Zandi," ultimately it could effect people's jobs."
If millions of borrowers like the Clavons don't get some help, it will be the rest of the economy that needs it.
(© MMVII, CBS Broadcasting Inc. All Rights Reserved.)
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