Foreclosures on the rise in suburbs of Baltimore

Mortgage deals from housing boom blow up in owners' faces

April 08, 2007|By Jamie Smith Hopkins | Jamie Smith Hopkins,[SUN REPORTER]

An Edgewater house with a new siding-and-stone facade. A five-bedroom in Hanover, two-car garage attached. A West Friendship mansion on nearly an acre of gently sloping land. A million-dollar Colonial in a Columbia development so new, the sales office is still open.

Suburban. Symbols of affluence. And - as recently as the past few weeks - all in foreclosure.

The new wave of mortgage defaults hitting the region, part of a nationwide spike, is not primarily a city problem. Foreclosure filings rose four times faster last year in Baltimore's suburbs than in Baltimore - up 15 percent versus less than 4 percent in the city, court records show. To the south in Montgomery, one of the nation's wealthiest counties, filings were up more than 30 percent.

Suburban Baltimore foreclosure cases are increasing even more quickly this year, and local housing advocates fear a worsening as more "exotic" mortgages reset to higher payments. Already, real estate agents and auctioneers say, some homeowners are desperately trying to sell before they are overwhelmed.

Statewide, nearly 45,000 mortgages had late payments at the end of last year, according to the Mortgage Bankers Association. The share of delinquent loans rose more than 10 percent from 2005, the biggest year-over-year jump since the last recession.

Christy L. Grambo, 31, isn't surprised. She has friends in trouble. She saw a home in the area sell and within a few months get taken back by the bank for nonpayment. And that pretty Edgewater house with the new facade? Hers.

"It's sad. It really, really is," said Grambo, who bought the Anne Arundel property with her husband, Erik, for $382,500 a year and a half ago. They have a son, 3, and a child on the way.

The Grambos have twice saved their four-bedroom house from a foreclosure auction, most recently last month - homeowners in the foreclosure process can still work out a deal with their lenders. Erik D. Grambo, who has dreams of buying land and building a home someday, is hopeful that the situation is improving. But with $3,600-a-month payments, things are tight now.

Do the math

The couple are typical of the changing face of foreclosure, which is no longer just about job loss, illness or divorce. Increasingly, it's about the loans.

As the housing boom pushed prices skyward here and across the country, buyers - even those with some home equity - stretched to make the numbers work. And they could do so like never before, with lenders offering a head-spinning array of options. No money down. Adjustable rates. Interest-only payments. Payments that wouldn't cover even the interest. The catch: Higher costs down the road - much higher, in some cases.

When the market slowed and then took a turn for the worse last summer, some homeowners found themselves in trouble.

The Grambos think they probably would have been all right if their last home - put on the market just after the housing boom - hadn't taken so long to sell; they had four months of paying mortgages on both places. Because they financed the full cost of the Edgewater house and got an adjustable rate, they have little equity cushion and the likelihood of increased payments in the future. They tried to sell and couldn't, caught by the market downturn. They were close to refinancing but decided it wouldn't help.

Their fledging construction business is doing well, with only a few slow months. As things began to unravel, though, there was no room for any downtime.

"We had a decent income; we had things put away," said Christy Grambo. "And it just all crashed."


Sherrie Brandquist, president of Fair Housing Rescue in Baltimore County, is hearing this a lot. She negotiates with lenders on behalf of homeowners in trouble who want to sell but can't get offers to cover all that they owe.

"It's not just that the market turned," said Brandquist, who in a year on the job has worked on cases involving homes ranging in price from $130,000 to $1.8 million. "I'm seeing that we have come out of five years of reckless lending."

Suburbia wasn't immune to foreclosures before. In the Baltimore area, the number of filings was higher at the start of the housing boom several years ago, improving as escalating home prices gave homeowners more options - refinance or sell for a quick profit.

But the sharp increase in foreclosures since then - here and in other affluent areas - seems like a new problem, said Rick Sharga of RealtyTrac Inc., a California company that tracks foreclosures. He thinks middle- and upper-middle-income homeowners have overextended themselves, betting on rising income and home equity - and losing those bets.

Consider, for instance, a western Howard County home whose lender filed for foreclosure last month: Built last year, it's nearly three times the size of an average new house, with a double-door entrance, a circular driveway and a four-car garage. Balance due on the loan: about $1.5 million.

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