One-fifth of the "subprime" mortgage loans that Marylanders took out this year will end in foreclosure and home loss, according to a report released yesterday that predicts problems nationwide.
Subprime borrowers typically are those who have credit problems and pay higher interest rates as a result.
The estimates, by the Center for Responsible Lending, reflect the end of the housing boom and come at a time when subprime lending has grown rapidly to about 20 percent of new loans.
As home prices have stalled or dropped around the country and the pace of sales has slowed in recent months, newer homeowners have less ability to refinance or sell quickly to dig themselves out in case of financial trouble.
The findings are especially worrisome for Baltimore, where - according to one recent survey - about half of mortgage loans made to homebuyers in recent years are subprime.
The center, a nonprofit critic of predatory lending, predicts that 19 percent of subprime loans made to Americans in the past two years for primary residences will eventually end in foreclosure and home loss, affecting 2.2 million households. Many will be African-American and Latino because a disproportionate share of subprime borrowers are from those minority groups, the center said.
Meanwhile, homeowners who refinance from those loans into new subprime mortgages will have an even higher chance of losing their property, according to the study.
About 1 percent of all loans and just under 4 percent of subprime loans were in various stages of the foreclosure process in the third quarter of this year, according to the Mortgage Bankers Association.
The worst foreclosure rate in the modern mortgage market was about 15 percent in the oil-patch states of Arkansas, Louisiana, Mississipppi and Oklahoma during the 1980s, the center said in its report. Just under 10 percent of subprime loans made in 1998 had been foreclosed upon by mid-2005, it said.
States coming off hot housing markets over the next couple of years will fare worst, the center believes.
It projects that Maryland, which has one of the nation's lower foreclosure rates, will have the ninth-highest share of eventual foreclosures among subprime loans originated in the first nine months of this year - 20.6 percent. Nevada's figure of 23.7 percent will top the list, the center said.
