Groups to aid home buyers

Subprime mortgages blamed for record foreclosures in city

May 05, 2007|By Brent Jones | Brent Jones,Sun Reporter

Reacting to the rising number of foreclosures in the Baltimore metropolitan area, a nonprofit group is working with Bank of America and Citigroup to offer financial help to homeowners who have fallen behind on mortgage payments.

A study by the Reinvestment Fund shows that subprime lenders issued about half of the mortgages in Baltimore in recent years. Home buyers with bad credit records received the loans, which came with unusually high interest rates. The wave of subprime loans helped to fuel a housing boom, but many recipients are in danger of losing their homes because they cannot pay the mortgages.

Yesterday, an official with the Neighborhood Assistance Corporation of America, an 18-year-old housing advocacy group based in Boston, said its representatives would offer counseling in Baltimore on May 19 at 1 E. Mount Royal Ave. from 2 p.m. to 4 p.m.

NACA is working with Bank of America and Citigroup, which have committed $1 billion to battle a wave of delinquencies and foreclosures caused by subprime lending.

The Rev. Graylan Hagler, development director for the advocacy group and a Baltimore native, said he is seeking an explanation as to why homeowners with credit problems tend to pay higher interest rates.

"Somebody has got to ask the question if there is any justification for the subprime industry in the first place," he said.

Hagler appeared yesterday at a news conference in front of Rep. Elijah E. Cummings' downtown office. Mayor Sheila Dixon and Cummings addressed the area's foreclosure rate, urging homeowners, especially those with a subprime loan, to seek help through the city's 311 nonemergency phone number.

Representatives from NeighborWorks Center for Foreclosure Solutions are expected to counsel troubled homeowners.

"Let me be clear, subprime lenders have a very vital role to play," Cummings said. "But we've got to make sure people know what they're going into, that they realize the history of some of these firms. If you go into a firm, for example, that's got a 60 percent foreclosure rate, and you know that from the beginning, then you can talk to somebody and see if it's the right thing to do."

Baltimore Housing Commissioner Paul T. Graziano said the city is shifting its focus from house flipping to the foreclosure rate.

"Our next wave will look at subprime lending and the people getting into difficulty," Graziano said.

Baltimore Homeowners Preservation Coalition officials say the upward spike in foreclosures is caused, in part, by divorces and illnesses that prevent homeowners from working. There were more than 25,000 mortgage foreclosures in Baltimore from 2000 through April 2006.

In Maryland, about one in eight subprime loans was delinquent from the end of 2005 to the end of 2006, and the percentage of subprime loans with late payments rose more than 30 percent during that time, according to Mortgage Bankers Association, a national organization representing real estate financiers. Cummings said foreclosures have cost the city nearly $1.8 billion in reduced property values in the past five years.

"These statistics do not truly measure the devastating cost in human terms to the people of our city, not to mention the damage being done to the stability to our neighborhoods," Cummings said. "There is no indication that this trend is reversing."

Ken Wade, CEO of NeighborWorks America, said about 50 percent of people whose homes go in foreclosure never have contact with their lender.

"They don't reach out to anyone, and that's a tragedy," he said.

Cornelia Barnett, who wore a yellow `Stop Loan Sharks' shirt at the news conference, said her subprime loan - with an 11 percent interest rate - on her $181,000 Harford County house has her in danger of losing her property.

Barnett said she lost her job after an accident and fell behind in her payments.

She said she will seek help through NACA.

"What I'm trying to do now is consolidate my loan into one affordable monthly payment," she said.

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