Success becomes a pit of debt: Reversal: A couple who rehabilitated several houses finds the profit evaporates without a grant Campbell and Baker

December 14, 1997|By John B. O'Donnell and Ronnie Greene | John B. O'Donnell and Ronnie Greene,SUN STAFF

When banks said no to Cathy Campbell and Arthur D. Baker, the city said yes.

"I thought we had hit the lottery," Campbell recalled, describing how the Frederick County couple landed more than $260,000 to fix houses in Reservoir Hill.

The Campbell-Baker venture shows how city financing can come easily. And how the location of houses often is a matter of luck, not planning: Wherever a potential developer can buy a rundown house, the city will pay.

Campbell, 47, and Baker, 44, live in a small patch of suburbia on farmland north of Frederick. On a warm afternoon, Baker stood in the cluttered carport, his wiry hair flying as he described their journey to Baltimore in 1991.

After he lost his electrician's job, he and Campbell bought a Reservoir Hill house owned by a friend. Campbell says she marched through the Yellow Pages seeking a loan to fix it.

"The banks called it 'speculative real estate.' And they were not interested at all," she said.

The city's housing agency was, urging the couple to buy another house to package a two-property rehab. That done, the city provided $135,000 to repair 910-12 Newington Ave. About half doesn't have to be repaid if they rent the six apartments to low-income tenants for 10 years.

In 1994, after they bought a third house, on Lennox Street, they were back for $130,077 from a new housing administration. They received a $40,077 loan from the Community Development Financing Corp. and the balance in a city grant.

Their repairs came in a neighborhood seemingly slipping deeper in decay, filled with boarded derelicts. Late one morning recently, Newington Avenue is virtually deserted, save for a young man selling drugs at the corner of Callow Avenue. Sales are brisk: Three in five minutes.

With three rehabs behind them, Baker and Campbell had visions of a larger real estate portfolio. They bought three more Lennox Street houses, looking for additional rental income.

Their luck turned. The housing department deal they had gotten twice before wasn't available.

Then they fell behind in their CDFC payments, and the agency filed foreclosure on their city-financed properties. On Lennox Street, for instance, they owed more than $39,000 of the $40,000 CDFC loan.

But hours before a scheduled auction, Campbell and Baker arranged new private financing and paid the CDFC. They are not entirely off the hook: Under terms of their city grants, they must rent to low-income tenants or face repayment of $158,000.

Pub Date: 12/14/97

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