When Dora Loeven wanted to buy a house in 1986, she turned to a new nonprofit organization called Tri-Churches Housing Inc. The nonprofit was so small it had to borrow an expert from another homeownership counseling organization to help guide Loeven through the financial intricacies of home buying.
The 10 1/2 -foot-wide rowhouse she bought doesn't offer the alpine vistas that she'd prefer, but it does deliver a great view of Pigtown.
"It gives me my freedom, independence and a little bit of property," said Loeven, 74, a native of Holland who moved to the United States in the late 1960s. "I have flowers here in my little front yard at the moment - tulips - and people often look at them and they say, 'Isn't that nice.'"
Since Loeven moved into her Pigtown rowhouse 14 years ago, the Tri-Churches staff has grown to five, and the nonprofit organization now advises 500 people per year. Free homeownership counseling in Baltimore has enjoyed similar growth. Now, housing counseling is provided in the city by 25 organizations, 10 of which have started in the past decade. But along with that growth have come problems.
The groups, generally funded by a mix of federal, state and local grants as well as support from banks and other mortgage lenders, educate first-time buyers about the home-buying process. Buyers, some of whom have never had a checking account, learn everything from how to choose a loan, to what to look for in a house, to how to prepare for the responsibilities of homeownership.
In the ideal situation, counselors talk with prospective buyers before the customers even begin looking at homes. At larger organizations, participants might first attend a home-buying overview seminar and then take classes on how to look for a home, the loan process, and what happens at settlement.
This education can be followed by individual counseling for prospective buyers on such subjects as improving bad credit, determining the amount of the monthly mortgage they can afford and setting aside money for home repairs. Bolstered with this knowledge, they then can seek a home.
While most first-time buyers gain free, valuable information from the counselors, some local housing experts question whether the current state of homeownership counseling reflects more quantity than quality. The 25 groups offering homeownership counseling have different qualifications for their counselors, resulting in a wide disparity in experience and abilities from one organization to the next.
The organizations also must meet such challenges as being impartial advisers to buyers while receiving financial support from lenders, and dealing with last-minute demands from buyers desperate to meet a loan's counseling requirement.
Vincent Quayle, executive director of the St. Ambrose Housing Aid Center, is a fierce critic of how most programs work.
"There's not real homeownership counseling [in Baltimore], or very little. Most of what we have is a sham," said Quayle, who in 1968 helped found St. Ambrose, the city's first homeownership counseling organization.
He points out that 5,000 petitions for foreclosure were filed in the city last year. "That's how bad things are right now in Baltimore," Quayle said. He blames his organization and others for not catching on sooner to the fraudulent real estate schemes that have troubled the city in recent years.
New and inexperienced counselors are partly to blame, he said. "Everyone is running around calling themselves counselors," Quayle said. "How do you tell the good ones from the bad ones or the incompetent ones? It's not easy."
While the process may be imperfect, it can save buyers from bad real estate deals that can become financial quagmires.
Will Backstrom, a homeownership counselor for Neighborhood Housing Services in Patterson Park, offers a cautionary tale.
Backstrom remembers advising two women on different occasions that each should wait to buy a house. Each needed a year to establish a record of stable income, clean up credit problems and save money. Neither wanted to wait.
He learned later that both women signed contracts with a "flipper," a real estate investor who buys deteriorating houses, makes cosmetic repairs, and sells the houses for inflated prices, often slipping in a second mortgage unknown to buyers.
Months later, Backstrom happened to see the women after they realized they had been taken. "They both came up to me and said, 'I should have listened to what you said.'"
Counseling comes first
Other buyers turn the education process on its head by reaching out for counseling after signing a contract on the house they want.
"I think we should say no to all of them," said Quayle, who acknowledges that St. Ambrose counselors do some "post-purchase" counseling. "If a family is on contract, the counselor is in an impossible situation because the family is emotionally attached to the house and there's very little the counselor can say other than, 'Call us when you fall behind on your mortgage and we'll tell you what to do.'"
Thomas H. Jaudon, chief of Baltimore's Home Ownership Institute, which works to increase homeownership in the city, also opposes post-purchase counseling.
"That can be a problem because you know the agent, lender, and seller are all putting pressure on me, the buyer, to buy that house, and I already signed the contract and I've got to jump through the hoop of counseling to push the deal through," Jaudon said.
That fast-forward approach to counseling reduces its value, according to Becky Sherblom, executive director for the Maryland Center for Community Development.
Often, a lender will call a counseling organization and ask to get counseling for a client the next day. "This puts pressure on the counselor," Sherblom said. "They have to have the courage to say, 'No, counseling is more important than that and you need to give me time to work with this person.'"
Another challenge facing homeownership counseling organizations is the lack of standardized education for counselors. Training varies between organizations.
"You've got to have counselors who have the same training level to be effective. That's my conclusion, absolutely," Jaudon said. "There's so many things going on in the real estate market regarding the fraudulent real estate practices. Counselors have to be brought up to speed."
Besides having to know the buying process cold, counselors need to be schooled in the various grants, low-interest loans and tax incentives available in their area. A counselor who doesn't realize that the client's employer supports Live Near Your Work, a state-, local- and employer-funded program, could cost the home buyer a $3,000 grant. Or an uninformed counselor might not know about a $5,000 grant for closing costs to home buyers in Empowerment Zones, city tax credits for home improvement, Catholic school tuition support for families buying in the Patterson Park area, or other programs.
To consistently get well-trained counselors, said Tracy Gosson, director of the Live Baltimore Marketing Center, the city should copy a program set up in Boston. That city trains homeownership counselors to become certified instructors of home-buying classes. Buyers who take classes from the certified instructors can receive $1,000 grants from the city toward their new homes, Gosson said.
"You get an educated home buyer because they want the money. You have homeownership counselors who are all on the same level. And it protects the city from predatory lending," she said.
Sherblom, at the Maryland Center for Community Development, which trains 16 to 20 counselors per year, doesn't think that licensing or certification alone are the answer.
"We do offer a certification course and we encourage counselors to go through our training and get as much other professional development as they can to stay current, but looking at other industries I don't see licensing in and of itself is the best way of doing quality control," she said.
Sherblom noted that when her office receives repeated complaints about a homeownership counseling agency, her office stops giving referrals to that agency. Her office refers people to 16 of the 25 organizations in the city. Complaints run from long waits for counseling to poorly trained staff.
Two years ago Fannie Mae, the federally charted organization that supplies funds to lenders, tried to get Baltimore's homeownership counseling organizations to consolidate, creating fewer but better staffed groups, according to Ramona Johnson, senior deputy director at Fannie Mae in Baltimore. However, the effort never got past the discussion stage.
"It was a mixed reaction," Johnson said. "Overall, I think most felt it was a good idea thinking in those terms. How it would be implemented was the most difficult part."
Regardless of its size, each organization must secure funding to continue to offer services. For some, this creates an ethical challenge: They receive financial support from a mortgage lender, but must remain impartial in looking out for the buyer's best interests.
Backstrom, the Patterson Park counselor, said he scrupulously avoids "steering" people to a specific bank. Instead, he provides prospective home buyers with business cards from six reputable lenders and lets the buyers choose the best deal. "I don't want to be seen as an interested party with a fiduciary relationship," he said. "I don't want to be seen as steering. I'm very sensitive to that."
However, there are benefits to having close ties with a mortgage lender. ACORN Housing's clients receive below-market interest rates and avoid private mortgage insurance requirements through Bank of America. These arrangements are part of a national agreement the bank reached with ACORN.
"Our clients come in with an understanding they can choose to use any mortgage company that they wish, but we have a partnership with Bank of America," said Claudia Ray, acting director at ACORN Housing in Baltimore. Her organization is working to establish relationships with more mortgage companies, she said.
Provident Bank of Maryland provides financial support to homeownership counseling organizations in the city and receives mortgage loan referrals from them. However, bank officials say there's no requirement that clients be sent their way. "We don't write a check and expect X number of deals for that," said Rahn Barnes, vice president and community reinvestment officer at Provident. "It's not a quid pro quo. We'd love to have every candidate they have, but if they're a smart nonprofit they not only come to us, but to other institutions as well."
In addition to mortgage lenders, homeownership counseling organizations find themselves dealing with another big player in the home-buying process: real estate agents.
When counselors warn buyers away from a purchase that might stretch their budget, they can anger real estate agents who have crafted the deal and are set to profit from it.
"The feeling is within the industry that there are times when counselors are working against getting the person in a home," said Joseph T. Landers III, executive vice president of the Greater Baltimore Board of Realtors. "On the other side, the housing counselors say sometimes the agents are too aggressive in trying to get people in."
Still, most agents recognize that the counselors can provide a service that they can't, according to Landers. "A homeownership counselor can spend several months to a year getting someone ready, getting their credit in order, but if you're working on a commission, you don't necessarily have a year to spend," he said.
More communication between the two groups could help them reach their common goal, Landers said.
"On both the homeownership counseling and real estate sides, the overwhelming majority of people are genuinely concerned with doing the right thing, in helping people into homes that they're going to be in for a long time," he said.
To get help
Baltimore housing counseling agencies recommended by the Maryland Center for Community Development:
Baltimore Urban League, 410-523-8150
Druid Heights Community Development Corp., 410-523-1350
Harlem Park Revitalization Corp., 410-728-5086
Sandtown Winchester CDC, 410-462-1397
Southwest Seven NHS, 410-644-1904
Tri-Churches Housing Inc., 410-385-1463
Middle East Development Corp., 410-675-0900
Oliver Community Association, 410-685-0330
Southeast Development Inc., 410-327-1626
Comprehensive Housing Assistance Inc., 410-466-1990
The Development Corp., 410-578-7190
Belair-Edison Neighborhood Services, 410-485-8422
Govans Economic Management Senate Inc., 410-889-3015
Harbel Housing Partnership, 410-444-2100
St. Ambrose Housing Aid Center, 410-235-5770
Homeownership counselors can lead participants to special mortgage products that may offer below-market rate financing. They can also:
Give information on preferred lenders who have built working relationships with the counseling organization.
Run a credit report and instruct participants on how to repair poor credit.
Tell a participant how much house he or she will be able to afford.
Teach participants the responsibilities of being a homeowner.
Offer participants renovated housing -- owned by counseling agencies -- at market or below market cost.
Give insight and information on specific neighborhoods and the quality of housing stock in the neighborhood.
SOURCE: Live Baltimore Marketing Center
For more information
Housing Hotline for Referral to Housing Counseling 1-888-949-6677