Homebuyers still waiting for HUD aid

Ten months ago, housing department had promised relief

Hundreds of cases rejected

Baltimoreans trapped in real estate scandal are facing foreclosure

March 18, 2001|By John B. O'Donnell | John B. O'Donnell,SUN STAFF

Ten months after a senior Clinton administration official promised financial relief to Baltimoreans who paid excessive prices for their houses and were saddled with inflated government-backed mortgages, not one loan has been reduced.

Nonprofit housing agencies and community organizations have sent hundreds of cases to the U.S. Department of Housing and Urban Development, many of them involving property flips.

Most of the cases have been rejected, while others are still being considered, local housing activists say.

Meantime, hundreds of Baltimoreans whose mortgages were backed by the Federal Housing Administration, an agency of HUD, are losing their homes to foreclosure.

Last year, foreclosure suits were filed against more than 1,400 FHA borrowers, despite two 90-day moratoriums, one that was citywide and one that covered five east-side ZIP codes.

William C. Apgar, an assistant secretary of HUD and head of the FHA, got a standing ovation in May when he announced the HUD effort to help victims of property flipping - the purchase of a home and quick resale at a huge price increase.

"The dumbest thing HUD could do is to insure at $100,000 today a home that sold a month ago for $50,000," Apgar told a meeting of a national task force on predatory lending.

"We've done it, but we're gonna stop."

And, he added, buyers who are trapped in inflated deals would be helped. Among other things, mortgages would be reduced to the actual value of the house.

With Apgar and other Clinton political appointees gone and not yet replaced by the Bush administration, HUD is backing away from the promise.

HUD will provide relief in only five east-side ZIP codes, while perhaps making exceptions in a few cases, advocates have been told. Only those who bought their houses after Aug. 15, 1998, will be helped. And, only buyers who paid at least 30 percent more than the actual value of the house will get assistance.

"I'm flabbergasted," says Ken Strong of the Community Law Center, the coordinator of a city task force that has been working with HUD to turn Apgar's promise into reality.

"Absolute treachery," fumes Andre Weitzman, a lawyer who has represented dozens of flipping victims.

"It's pretty bleak out there," adds Vincent P. Quayle, who heads the St. Ambrose Housing Aid Center, a nonprofit organization that has been promised nearly $500,000 in HUD funds to be a clearinghouse for problem FHA cases.

Ineligible

HUD confirmed late Friday that no mortgage had been reduced, citing limited legal authority and a series of problems it confronts.

In some cases, officials say, homeowners have credit problems that make them ineligible for new mortgages, even at reduced amounts.

Lemar C. Wooley, a HUD spokesman in Washington, said that the agency is "working with St. Ambrose to determine `workable' relief for six identified victims" and that it had provided funds to two others to move out of their houses.

He also said that HUD had reviewed thousands of cases and that "allegations of flipping could not be substantiated" in the vast majority.

Many promises

At the May meeting, Apgar said: "The homebuyer should be able to stay in that home at a fair price, and that's the system that we will launch here."

Baltimore would become the laboratory for a nationwide effort to curb flipping and mortgage fraud, he said.

HUD would demand that the lenders reduce inflated mortgages to the actual value of the houses, he said.

If they didn't, FHA "will cancel the mortgage. We'll sell the home back to the owners at a fair price, and we'll take the difference. We'll have a loss there, and we'll try to collect that money from the guilty party."

He also promised to issue "credit repair letters" for homebuyers whose credit had been scarred as the result of the purchase and, if all else failed, to provide money for buyers to move.

Surprised

With the end of the Clinton administration, Apgar returned to the John F. Kennedy School of Government at Harvard, where he is a lecturer in public policy.

He expressed surprise last week that none of the homebuyers had gotten their loans reduced.

"There were cases teed up and working through the process," Apgar said during a telephone interview.

"The plan was to proceed cautiously because there's no doubt in my mind that the first case will bring litigation" from lenders.

On other aspects of combating flipping, he said HUD had made substantial strides.

It had taken steps to increase counseling for homebuyers and "to stop flips before they occurred."

"There was a whole group of buyers who may not have known they were about to be set up for a loan at an inflated price and we blocked that loan from happening," he said.

Wooley, the HUD spokesman, said reviews had identified 501 potential flips before the sale.

"We had a terrific partnership with the people in Baltimore and learned a lot there," Apgar said.

Demanding action

U.S. Sen. Barbara A. Mikulski was the key figure in creating that partnership by getting HUD to focus on the flipping problem in Baltimore.

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