The best immunization against foreclosure used to be affluence. No more.
The number of homeowners defaulting on their loans in the Baltimore metro area last year rose most quickly among the highest- income counties with the most expensive housing - Howard, Anne Arundel and Carroll. Maryland's income-rich Washington suburbs are feeling it even more keenly, a Sun analysis has found.
Lenders filed about 10,700 mortgage foreclosure cases in Baltimore and its five suburban counties, up 36 percent from a year earlier. On the Maryland side of the Washington area - Frederick, Montgomery, Prince George's, Charles and Calvert counties - cases doubled, to almost 11,900.
A year earlier, foreclosure cases in those counties were well below the number in the Baltimore area.
"The demographics have certainly changed," said Anne Balcer Norton, director of foreclosure prevention at St. Ambrose Housing Aid Center, a nonprofit in Baltimore that has fielded calls for help from homeowners in toney areas such as Roland Park and Bethesda. "Everyone's affected by this."
In Montgomery, where the typical household income tops $87,000, mortgage foreclosure cases rose nearly 130 percent last year. That was the biggest jump in the state.
"The worst is yet to come," warned Eric S. Friedman, director of Montgomery County's Office of Consumer Protection. "A lot more adjustable-rate mortgages are going to be resetting in 2008 and 2009."
The numbers, assembled by The Sun from court records statewide, offer a rare reliable look at how the counties and Baltimore City are faring in the nationwide foreclosure crisis.
Though the state is crafting new laws and programs to stem the problem, grasping its extent has proved difficult. The government does not compile statistics on foreclosure actions initiated by lenders at local circuit courthouses, the last step before auction. RealtyTrac, a provider of foreclosure data frequently cited by state officials, has conceded there are problems with its Maryland data, saying collection here is difficult.
The court caseloads show that no part of the state escaped without an increase last year.
Counties with high incomes and pricey housing were among the hardest hit. All but two of the 10 most affluent counties - those with median household incomes topping $70,000 - saw foreclosure cases rise by more than 50 percent.
Montgomery's big increase pushed cases to nearly 3,000. Besides that county, the largest surges came in Frederick (up 125 percent) and Charles (up 91 percent). In Prince George's, mortgage foreclosure cases rose 89 percent to more than 6,400 - the highest in the state.
"I realize I'm not the only one, but I didn't realize how many people are being confronted ... with this kind of situation," said LuJuanda Dixon, who is working with counseling group HomeFree-USA to try to save the house in Bowie that she bought with her husband last year for $650,000. Before Danny Dixon lost his job in November, they were making $100,000 a year.
Economists say defaults and foreclosures are taking a toll on the housing market, and they expect the effects will worsen. The 25,000 mortgage foreclosure cases filed in Maryland in 2007 are equal to 40 percent of all the homes sold through real estate agents that year. In 2006, foreclosure cases equalled 20 percent of home sales.
Most foreclosure actions are halted before the homes are auctioned, records from Towson-based Alex Cooper Auctioneers show. Even so, there's a ripple effect. BeBe Stokes, a real estate agent in Prince George's County, is getting a lot of calls from homeowners begging for help to sell before their lenders step in.
She understands where they're coming from. She fell two months behind on her own mortgage recently, pressed by a steep cut in income because of the housing-market downturn and - when she sold investment properties to stay afloat - an unexpectedly high income tax hit.
"It's like a snowball," said Stokes, who bought her Upper Marlboro house for just over $1 million in 2006. It doesn't help, she said, that her lender changed her loan terms a week before she settled on her home, increasing her monthly payments by nearly $2,000.
The trends are similar in Baltimore's pricey housing markets. Mortgage foreclosure cases increased nearly 70 percent in Howard County, where half the homes sold for more than $390,000 last year. Cases rose by more than 50 percent in both Anne Arundel and Carroll, where median prices were $340,000 and $335,000, respectively.
Baltimore City - the top foreclosure spot in Maryland for half the decade - saw cases increase 26 percent, one of the smaller rises, though its total caseload of about 4,000 last year was the second-highest in the state. Still, it has yet to reach the levels of the early part of the decade, when homes flipped in mortgage schemes were going into foreclosure in alarming numbers.
The city's median home sales price last year of $153,000 was among the most affordable in Maryland. Most of the counties with prices below the state average also saw comparatively small rises in foreclosure cases, including Dorchester, Somerset and Kent on the Eastern Shore. Kent County's cases went up just 4 percent, to a total of 52, court records show.
In the pricier counties, people often had to stretch more to buy. The results can be seen in the foreclosure auctions, once dominated by modest rowhouses. Last year, the properties on the block included a six-bedroom spread in Harford, complete with a butler's pantry, and a complex in Charles that changed hands two years ago for $1.4 million.
Housing experts blame the frenzy of easy mortgage money available during the housing boom and the beginning of the slump. The share of buyers opting for "piggyback loans," to cover the full cost of a home with no down payment, tripled in Montgomery County between 2004 and 2006 to three out of every 10, according to a recent study by the Reinvestment Fund for the Baltimore Homeownership Preservation Coalition. In Prince George's, four out of 10 buyers had piggyback loans in 2006 - nearly double the share in 2004.
The Reinvestment Fund also analyzed Baltimore City, where it found significantly less use of piggyback loans. But even in this cheaper market, more buyers were turning to these products.
New homeowners weren't the only ones stretching. Some longer-term owners are in trouble because they pulled money out in a refinancing.
"People were getting into things they could not afford and should not have been able to borrow for," said Ira Goldstein, director of policy and information services with the Reinvestment Fund.
Some borrowers knew it. Some, in fact, lied to get the loans, either by fudging the numbers so they could qualify or by participating in complex schemes to grab money from the lenders and run. Maryland's reported mortgage fraud as a share of loans originated last year was 15th-worst in the nation, according to a report released last week by the Mortgage Asset Research Institute and the Mortgage Bankers Association.
But other homeowners honestly thought they could afford their mortgages, lulled into a false sense of security by loan officers who told them not to worry, housing counselors say.
That happened to people with modest homes as well as the well-heeled. For lower-income residents, the end result can be more devastating.
"I'm homeless," said Emily Wade, 59, whose lender foreclosed on her Northwest Baltimore house at the end of 2006. "Some nights I'll stay with my daughter. Some nights - I have a couple of girlfriends, I'll go sleep on their couch. If the weather's not too cold, I'll sleep in my car."
Wade had inherited the house debt-free when her mother died. She also inherited property maintenance troubles, she said, and taking out a small mortgage seemed the best solution. But on a monthly income of $840, the $284-a-month payments proved too much even before the adjustable-rate loan reset.
When she applied in 2004, she was happy she qualified. Now, she wishes the lender would have raised red flags rather than pushing the loan through. "I took a chance on the American dream," Wade said, "and I lost."