Mortgage dangers skyrocket in state

The number of Maryland borrowers in danger of losing their homes is increasing at a dizzying pace.

Lenders were trying to foreclose on more than 13,000 homeowners at the end of last year, up about 150 percent from a year earlier, the Mortgage Bankers Association said yesterday. That's the biggest 12-month increase since the trade group began tracking the state numbers in 1979.


The percentage of loans in the foreclosure process remains higher nationwide, fueled by states harder hit by the housing slump and other economic troubles. The U.S. figure hit a record high, in fact, which has not happened in Maryland.

But the problem is worsening at a faster rate here.


"I've never seen anything like this," said Anne Balcer Norton, director of foreclosure prevention at St. Ambrose Housing Aid Center in Baltimore. "It's very upsetting."

The number of Maryland homeowners who are late on their payments but not yet facing foreclosure also rose. And that delinquency rate does not compare as well as it once did nationally. Thirty-one states had higher rates at the end of 2006, but now that group has shrunk to 23. The mortgage bankers attribute Maryland's deteriorating situation -- which comes despite its solid economy -- to an above-average run-up in prices during the housing boom.

"Anyplace where we have seen over the last five years a big increase in home prices, if I take that map and compare that now to the delinquency or the foreclosure increase map, they almost line up state for state," said Jay Brinkmann, the group's vice president of research and economics.

California and Florida, which saw bigger price jumps than Maryland, together accounted for 30 percent of loans entering the foreclosure process during the last three months of 2007. As values drop in those states, homeowners have "an incentive to walk away" from their loans -- especially adjustable-rate mortgages resetting to higher payments, said Doug Duncan, chief economist for the mortgage bankers.

In Maryland, as well as the nation, delinquencies and foreclosures are worst among higher-cost "subprime" loans. A sharp uptick in subprime lending during the housing boom not only increased the number of people in trouble, but is making it harder to help them, Norton said.

When local foreclosure numbers peaked during the early part of the decade, pressed upward by illegal property-flipping schemes in Baltimore, borrowers came to St. Ambrose with mortgages insured by the Federal Housing Administration. Housing counselors could work out the details for "loss-mitigation relief" in a matter of hours, Norton said, because the government has guidelines about how FHA lenders and homeowners should work together. The borrowers coming in nowadays with subprime loans are not so fortunate.

"There's no process in place," Norton said. "It's just complete disarray."

Loan servicers met with state officials last week to work on a mortgage "triage" plan after Gov. Martin O'Malley condemned the industry for offering poor customer service. On Wednesday, lenders turned out to a foreclosure prevention event in Prince George's County to meet with borrowers in trouble.


"Foreclosure hurts everybody," said Stacey D. Stewart, chief diversity officer of mortgage financier Fannie Mae, speaking to the crowd of homeowners who had gathered for the clinic at the Show Place Arena. "It hurts the lender, it hurts the community and most of all, it hurts you."

The number of Marylanders late on their payments but not yet facing foreclosure topped 61,000 during the last three months of 2007, up 36 percent from a year earlier. A higher-than-normal portion of that group -- nearly a quarter -- are behind by at least three months, according to the bankers' records. The group's survey covers most first-lien loans.

Delinquencies are rising for prime and subprime loans alike. But subprime mortgages -- meant for people with challenged credit -- represent the lion's share of the problem. Twenty percent of subprime borrowers in Maryland are behind.

Though subprime loans make up one out of nine mortgages in the state, they account for more than half the loans in the foreclosure process.

The one upside the mortgage bankers see: Interest rates have been falling, which means a much lower payment increase for subprime and other borrowers whose adjustable-rate loans are resetting soon for the first time. Brinkmann said subprime borrowers are looking at increases of about 8 percent, rather than "payment shocks" of upward of 30 percent.

Nonprofit groups that help borrowers say they're overwhelmed with pleas for help as it is. Marcia Griffin, president of HomeFree-USA, a financial and homeownership counseling organization, said her Hyattsville office is getting 30 calls a day for foreclosure assistance. A year ago, it was three a day.


"It's a sad situation," she said.