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Program to renegotiate Burlington home mortgages

As foreclosure rates in New Jersey break records, one area community is trying a new program to keep people in their homes.

As foreclosure rates in New Jersey break records, one area community is trying a new program to keep people in their homes.

Burlington City, a town of 9,000 people on the Delaware River, is working with a $25 million investment fund that plans to buy up mortgages in danger of collapse. Fund managers plan to become the lender and work out deals with distressed homeowners, according to DeForest "Buster" Soaries, who heads the Central Jersey Community Development Corp. in Somerset, which is running the program in New Jersey.

Ultimately, Soaries hopes to raise as much as $400 million and expand the program into other communities. For now, it will be available to a total of about 625 families in Burlington City, Woodbridge, Trenton, New Brunswick, Franklin (Somerset County), Plainfield, Old Bridge, and Plainsboro.

Burlington Mayor James Fazzone is stitching Soaries' program into an overall plan to spruce up the town - the birthplace of James Fenimore Cooper, a stop on the Underground Railroad, and a rumored burial place of Blackbeard's treasure.

With the rich history of this town, which once manufactured rickshaws and rowboats, comes aged and obsolete housing stock. More than 70 percent of its 4,100 housing units were built before 1960, and most of those before 1939, according to census figures.

The town has demolished some of its wooden twin houses, hoping to make way for sturdier ones. It has renovated the old Lyceum Hall into a cultural and community center where, among other things, Burlington Community College will offer several basic courses. In neighborhoods, Fazzone would target specific blocks for mortgage help and renovations where needed. The city would demolish houses too far gone to be fixed up.

Fazzone is concerned, though, that redevelopment efforts could displace residents, and that's where the new mortgage program comes in.

"I think a neighborhood is the people," he said.

Like people across the state, many in Burlington City are just a layoff or an illness away from getting behind on their mortgages.

"If people don't have jobs, they're three months away from losing their home. They don't have a lot of money in the bank," Fazzone said. "Disaster is just around the corner."

He's hoping to help people before they get into too much trouble.

Soaries said he could begin buying mortgages and start negotiating with homeowners early next year. Many details of the program have yet to be worked out, including exactly when it would start and how many families would be helped. He hopes to expand the program rapidly from its first $25 million to $400 million sometime in 2010.

Frustrated with mortgage foreclosure programs, which he said were barely scratching the surface of the problem, Soaries formed a partnership with Atlanta-based APD Solutions to get the investment capital needed for the mortgage purchase program.

With that money, he said, he would "open a window of a world that is flying below the radar." It is a world where mortgage holders bundle nonperforming loans and sell them for pennies on the dollar.

Mortgage buyers typically seek big profits, often trying to extract the full loan price from a homeowner. Soaries would buy the discounted mortgage and then negotiate a new mortgage with the distressed homeowner, hoping to make a modest return on the investment and helping the homeowner secure an affordable mortgage.

If a family can't afford to pay a mortgage, he said, he would connect it to jobs, treatment centers, or possibly new housing.

"We will deal with family recovery - not just mortgage recovery," said Soaries, who served as secretary of state under Gov. Christie Whitman.

New Jersey ranked fifth in the nation in the percentage of mortgages in some stage of foreclosure in the third quarter of this year, according to figures from the Mortgage Bankers Association, a trade group.

The state already has broken last year's record of 51,623 foreclosures, according to figures compiled by the Administrative Office of the Courts. By the end of October, the state had reported 56,387 foreclosures.

High-priced mortgages with big balloon payments and adjustable interest rates given to people without the money to pay them back are a root cause of the nation's financial crisis. But now, experts say people who have seen income cuts because they lost their jobs or suffered another financial setback are joining the ranks of people whose homes are in foreclosure.

"The foreclosure problem is getting worse, not better," said Soaries. "We're trying to get ahead of the crisis."