Rescue is quirk of timing

Federal and state legislation to fight foreclosure arrives just in time to help some

for others, it's too late

July 30, 2008|By Sumathi Reddy | Sumathi Reddy,Sun reporter

Hundreds of thousands of struggling homeowners may get the help they need to stave off foreclosure from the federal housing bill that Congress passed last week. But for hundreds of thousands more, people like Veronica Peterson, it comes too late.

Peterson is waiting for the eviction notice that will force her out of the $545,000 house she bought in Columbia two years ago.

The 45-year-old single mother of three and home day care operator couldn't keep up with her mortgage payments, based on adjustable interest rates of 8 1/4 and 11 1/4 percent.

FOR THE RECORD - An article in yesterday's editions of The Sun incorrectly stated the number of children a Columbia woman facing foreclosure has. Veronica Peterson is a mother of four.
THE SUN REGRETS THE ERROR

The house has already been foreclosed on. The eviction notice, coming any day now.

"I don't know when I'm going, I don't know where I'm going," said Peterson.

A sweeping federal foreclosure bill approved last week is expected to help 400,000 homeowners nationwide refinance lower-cost mortgages with $300 billion in loans guaranteed by the government.

The measure also increases lending to Fannie Mae and Freddie Mac, two mortgage companies that deal with nearly half of the nation's mortgages.

Other measures include $15 billion in tax breaks, which include a provision giving first-time homebuyers interest-free loans of up to $7,500, the creation of an affordable rental housing fund, and funds for additional housing counseling and for buying and rehabilitating homes that have been foreclosed upon.

State breakdowns are not yet available for most figures, but Maryland officials say the bill will also give the state authority to issue $181 million in additional mortgage revenue bonds for the refinancing or purchase of homes, and developers building rental housing will have $1.1 million in tax credits available to them.

Another factor that will determine the impact of the legislation is how many lenders agree to participate in the refinancing program.

"A lot of this is still voluntary, so we have to see what the lenders will actually do," said Stuart Katzenberg, state director of Maryland ACORN. "I'm holding my breath. I think some will.

"But everyone assumed that as the housing market started collapsing these lenders would start modifying mortgages so that they wouldn't have all these foreclosures on their hands."

The legislation requires that the Federal Housing Administration mortgages be used only for primary residences, and to be eligible, a homeowner's mortgage debt-to-income ratio would have to be 31 percent or greater as of March 1. Also, a loan couldn't exceed 90 percent of the property's current value

A governing board will further refine eligibility standards for the program, which is expected to begin in October.

More than 13,000 Maryland homeowners were in foreclosure at the end of last year, a 150 percent increase from the previous year - the biggest annual rise since numbers were first tracked in 1979.

And while foreclosures have traditionally been a problem in urban centers like Baltimore, the effects of the current crisis have spread across the state from suburban areas in Howard and Prince George's counties to rural stretches in the state's western and southern reaches.

"We've seen a shift in the clients that are coming to us for assistance," said Anne Balcer Norton, director of foreclosure prevention for St. Ambrose Housing Aid Center in Baltimore. "Foreclosure was always a Baltimore City-specific issue. The demographic has changed. It's widespread and hitting all income and socioeconomic backgrounds."

Gov. Martin O'Malley and Prince George's County Executive Jack B. Johnson announced a program yesterday to set aside $2.5 million in state money and $1.5 million in county money to provide mortgage risk insurance to encourage local banks to refinance loans for residents facing foreclosure.

The program is the latest state effort to combat foreclosures, after a package of legislation approved by the General Assembly this year that lengthens the foreclosure process, makes mortgage fraud a crime and reforms lending practices.

Still, the problem remains most acute and visible in cities like Baltimore.

Baltimore City Housing Commissioner Paul T. Graziano said that, although the legislation will provide "much needed relief," he expects a significant uptick in foreclosure filings this year. The city has 4,300 mortgages with adjustable rates that will be reset this year, Graziano said.

"It's really only a beginning, and the market is going to have to sort this out, and I'm sure it's going to be another year or two before things start to settle," he said. "It's an important and very major first step, but it's not going to make the problem go away."

The legislation also earmarks $4 billion nationally to buy and rehabilitate homes that have been foreclosed upon. In Baltimore, where vacant homes have long been a problem, that money is crucial to sustaining progress, state, city and nonprofit officials agree.

Traditionally stable and transitional neighborhoods, like Reservoir Hill and Belair-Edison, have taken a hit with the recent waves of foreclosures.

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