Cuomo taking action on FHA foreclosures

8-week moratorium to be declared in Belair-Edison

March 30, 2000|By John B. O'Donnell | John B. O'Donnell,SUN STAFF

Responding to complaints that federal housing policies have "resulted in tremendous damage" to Baltimore neighborhoods, U.S. Housing Secretary Andrew M. Cuomo told city nonprofit agencies yesterday that he would be willing to halt Federal Housing Administration foreclosures in the Belair-Edison area for eight weeks, an aide to Sen. Barbara A. Mikulski and participants in the meeting said.

They said Cuomo also agreed to formation of a federally led Baltimore task force that would "find a solution to flipping, predatory lending and FHA disposal" of houses the agency acquires through foreclosures, said Johanna Ramos-Boyer, Mikulski's press secretary.

She said Cuomo told Mikulski yesterday that he would announce the moratorium and the task force today. He is scheduled to testify this morning before a Senate Appropriations subcommittee, where Mikulski is the senior Democrat.

Last night, a spokesman for Cuomo would not confirm accounts of the meeting held at the Department of Housing and Urban Development. "We certainly are committed to fighting against predatory lending," said Lee Jones.

That term is used to describe mortgages and home equity loans for which borrowers -- usually the working poor -- pay high fees to get high-interest loans.

The heads of three Baltimore nonprofits who have been complaining about Federal Housing Administration policies for months met with Cuomo yesterday after Mikulski summoned him to her Capitol Hill office Tuesday afternoon. "She told him there was a problem, she wanted something done," Ramos-Boyer said.

Her meeting with Cuomo occurred after Mikulski got an earful Monday about FHA problems in Baltimore during a subcommittee hearing at the World Trade Center. The FHA is an agency within HUD.

Witnesses at the Monday hearing described rampant property flipping, in which houses are bought and quickly resold for huge markups, in Baltimore. While flipping can be legal, many deals in the last four years have been accompanied by inflated appraisals and falsified documents that made the borrower look eligible for the loan.

The buyers often are single mothers with low-wage jobs who end up defaulting on the mortgages. In cases where FHA insures the loans, the agency pays off the lender and takes title to the house.

Witnesses complained that once HUD acquires the houses, they sit vacant for months -- contributing to decline in neighborhoods -- and that HUD does not fix them up before selling them, discouraging prospective homeowners from trying to buy them.

Vincent P. Quayle, who heads the St. Ambrose Housing Aid Center, proposed to Cuomo that non-profit agencies be hired to rehabilitate the houses and sell them to homeowners.

On Monday, Quayle claimed that Baltimore has the highest number of FHA foreclosures per capita in the nation. He accused the agency of "abdication of responsibility" to oversee issuance of loans and said that "since 1994, FHA has been insuring thousands of bad loans in Maryland and particularly in Baltimore."

Quayle said that in one area of Belair-Edison in northeast Baltimore, around the Shrine of the Little Flower Catholic Church, the FHA insured 193 mortgages in the past four years and more than a quarter of them have gone into foreclosure.

During the eight-week moratorium, Quayle said his agency would meet with all borrowers who face foreclosure and examine their deals to see if fraud was involved. If it finds fraud, he said, the information would be turned over to HUD investigators and the agency would be asked not to pay off the lender under the insurance policy.

Quayle met with Cuomo yesterday along with Ken Strong, who heads the South East Community Organization, and Ed Rutkowski of the Patterson Park Community Development Corporation.

They came away from the session, which lasted more than an hour, praising Cuomo for meeting them and thanking Mikulski for prompting him to do it.

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