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Northeast Lender Refinances Borrowers Out of Chapter 13

First Hallmark Mortgage sees niche in bankrupt borrowers

August 16, 2004


While thousands of people file for bankruptcy every year -- leaving their prospects for a new mortgage in shambles, one New Jersey mortgage banker sees their financial woes as an opportunity to elevate its niche business.

First Hallmark Mortgage Corp. says it offers borrowers in Chapter 13 an opportunity to pay off bankruptcy debt in one year -- much faster than the typical 5-year plan courts setup for repayment of debt. The retail mortgage banker reportedly helps borrowers lower their monthly bankruptcy payments, pay off debt early and restore their credit rating through a refinancing program that considers timely debt repayment as positive credit.

"Our program significantly reduces monthly payments under Chapter 13, letting a client breathe a sigh of relief," company president Bruno Viscariello said in a written statement. "We lend as much as 90 percent of the value of an owner's home, usually at 2 percent above the current conventional rate, in an effort to reorganize a client's debt."

The New Jersey-based subprime lender requires that borrowers "show that they actually made a conscious effort to get their credit back on track" by having timely bankruptcy and mortgage payment histories of one year, and sufficient equity in their homes in order to help get rid of debt in a shorter time frame, Viscariello said.

Other requirements borrowers must meet to qualify for the program are a minimum credit score of 500 and a debt ratio of 55%, the company president said.

The mortgage banker grew interested in offering the product when it gained insight on the numbers of people declaring bankruptcy, Viscareillo told MortgageDaily.com. "There's so many people out there in this situation ... we started marketing to those people and it became a niche product for us."

According to First Hallmark Mortgage Corp., a total of 82,670 New Jersey residents declared Chapter 13 personal bankruptcy in 2003. On the national level, Chapter 13 filings in fiscal year 2003 totaled 473,763, of which 99% were nonbusiness or personal, the Administrative Office of the U.S. Courts reported.

The company, which services New York, New Jersey, Maryland, Pennsylvania and Florida, said it started financing to homeowners in Chapter 13 five years ago and each month closes up to 120 loans under program. Last year, its originations reportedly totaled $133 million -- 50% was generated from the bankruptcy financing program.

First Hallmark retains borrowers' business well after originating the loans and selling it off to the secondary market, according to Viscariello.

"If a client has paid the new mortgage on time and in turn, reestablished credit, we can often provide no-cost refinancing and offer a more conventional rate," he continued. "Our strategy provides clients with the opportunity to regain control of their financial future."

Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.

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