Group fights foreclosure

New $800,000 effort offers advice to city homeowners in trouble

September 27, 2006|By Eric Siegel | Eric Siegel,SUN REPORTER

Baltimore homeowners who are having trouble meeting their mortgage payments will now be able to call the city's 311 number for referrals for assistance - part of an ambitious new initiative aimed at reducing the high number of foreclosures in the city.

The $800,000 program will pay for publicity and education, as well as greatly expanded counseling and legal services, principally through the St. Ambrose Housing Aid Center and Belair-Edison Neighborhoods Inc.

The aim of the effort by the Baltimore Homeownership Preservation Coalition is to provide increased opportunities for an independent review of loan documents before prospective buyers commit to a mortgage - and to encourage homeowners with financial problems to seek help before they become so deeply in debt that there is no alternative to losing their house.

Besides the obvious damage to the lives of individuals, advocates say foreclosures are an impediment to efforts to revive some of the city's fragile neighborhoods, in part by stimulating homeownership.

"What dawned on us is we're filling up a big bucket of water with a hole in the bottom," said Carol Gilbert, a program officer with the Goldseker Foundation and co-chairwoman of the coalition. "We've been focusing on new homeowners and not in keeping the ones we have."

Separately, Maryland officials this week warned consumers about unscrupulous private "foreclosure consultants" who dupe homeowners into giving away their homes in the guise of providing help with delinquent mortgage payments.

Nationally and locally, concern is growing that foreclosures could rise as higher interest rates push up adjustable-rate mortgages and credit-challenged homeowners who bought houses with subprime mortgages get squeezed by higher energy bills and a slowing economy.

In Chicago, a three-year effort to preserve homeownership in the city's low- and moderate-income neighborhoods helped more than 1,300 families avoid foreclosure, according to the July final report of the Home Ownership Preservation Initiative.

Half of the money for the Baltimore effort will come from federal dollars funneled through the city, with the remainder made up from grants from local and national nonprofits and a private lender.

A public announcement about the initiative to reduce foreclosures will be made today on a street corner in Belair-Edison in Northeast Baltimore.

The neighborhood is one of the areas hardest hit by foreclosures over the last several years, according to a study paid for by the Goldseker Foundation and conducted by the Reinvestment Fund, a Philadelphia-based nonprofit that arranges financing for the revitalization of low-income communities and conducts research on housing markets.

There were more than 25,000 mortgage foreclosures in the city from 2000 through April of last year, the report said.

Though it said the number of foreclosures had declined by 8.5 percent between 2000 and 2004, the report described the ratio of properties in foreclosure to homeowners as "extraordinarily high" compared with other areas the group had studied. It said the number was nearly twice that of Philadelphia and nearly 2 1/2 times that of New Castle County, Del., which includes Wilmington.

The foreclosure rate in the city was in "stark contrast" to that of Maryland as a whole, which has one of the lowest foreclosure rates in the nation, the report said.

The report cited a number of possible factors leading to the city's high rate of foreclosure. These range from the large number of properties purchased with alternative financing methods such as adjustable-rate mortgages, to the property-flipping scams of the 1990s, to the high rate of default in the city's own aborted Settlement Expense Loan Program, which was started in 1993 as a way to aid first-time homebuyers and ended seven years later.

The report estimated that a disproportionate percentage of loans in foreclosure - 55 percent - were subprime, meaning they carry a higher interest rate because borrowers do not qualify for traditional mortgages. According to the report, subprime loans made up 49 percent of mortgages in the city.

A foreclosure is a legal filing taken by a lender when a property owner fails to make payments on his or her mortgage. While filing of a foreclosure does not necessarily lead to loss of property, the Reinvestment Fund study estimated that 70 percent of homeowners faced with foreclosure in the city eventually lost their house.

Two who were threatened with foreclosure but did not lose their homes were Wanda Watters and Stephan Schnell.

Both are first-time homeowners who bought their houses in the late 1990s, Watters in Chinquapin Park and Schnell in Gardenville in Northeast Baltimore. Both fell behind in their mortgage payments because of personal problems - in Watters' case, the serious illness of her son that caused her to miss work; in Schnell's, a divorce. Both were able to keep their houses by negotiating with their lenders through the staff of St. Ambrose.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.