Figures Confirm Foreclosure Woes Extend To County

BERLIN – The final report of Gov. Martin O’Malley’s Homeownership Preservation Task Force released last week revealed Maryland is right in the middle of a growing national foreclosure crisis and Worcester County has not been immune to the trend.

O’Malley commissioned the task force, made up of a conglomerate of private sector housing advocates, banks, mortgage lenders and elected officials from all over the state, last summer and charged it with finding both long-term solutions to help homeowners in imminent danger of losing their homes to foreclosure and long-term solutions to support sustainable homeownership in the future. Before the task force could delve into possible solutions to the problem, the members carefully examined the statistical data on foreclosure rates across the state and the information proved to be fairly daunting.

The task force compared the number of foreclosure events in the second quarter of 2006 to the second quarter of 2007, which revealed a sharp spike in the number of homeowners in Maryland at risk of losing their most important investments. For example, statewide there were 920 foreclosure events in the second quarter of 2006 compared to 4,092 in the second quarter of 2007, representing an increase of 344 percent.

In Worcester County, the percentage increase was more pronounced, although it is important to note the sample size was much smaller. For example, there was a mere one foreclosure event in Worcester County in the second quarter of 2006 compared to 17 foreclosure events in the second quarter of 2007, representing an alarming 1,600-percent increase.

While that 1,600-percent increase in the county is tempered somewhat by the size of the sample in Worcester, more current figures show the problem has only worsened in recent months. According to RealTrac, an independent company utilized by the governor’s task force that tracks foreclosure events in specific jurisdictions around the state, there are currently 24 properties in Worcester County in pre-foreclosure, where notices of default of loans have been sent to property owners; 19 properties currently in auction because of foreclosures; another 22 properties repossessed by banks and/or lenders; and 27 more properties in the county for sale by owner in a last ditch effort to recoup losses threatened by the foreclosure process.

Essentially, while there were just 17 foreclosure events in Worcester in the second quarter of this year, there are currently nearly 100 in various stages of the process in the county. Granted, many will get caught up and bring their loans out of default, but quite a few more will lose their homes because of the crisis. It’s important to note the properties listed in various stages of foreclosure in Worcester are in every corner of the county from Ocean City and Ocean Pines to Stockton and Girdletree and from every price range from $47,000 to $1 million and beyond.

While the numbers for Worcester appear dismal, they are not as bad as the numbers in other parts of Maryland and are far less worse then the figures in other parts of the country. Through October, there were around 1.8 million foreclosure filings nationwide in 2007 compared to 1.3 million in all of 2006 and the number increases daily.

“This is national issue,” said County Commissioner Bud Church, a long-time area realtor who just returned from a National Association of Realtors meeting on the growing crisis. “Worcester County is not unique in this. We have our fair share here, but it’s much worse in other areas. It’s only going to get worse before it gets better.”

The reasons for the nationwide foreclosure crisis are numerous and varied, but the crux of the issue always comes back to the recent real estate boom in Worcester and throughout the country when lenders wrote sub-prime and adjustable rate mortgages for prospective buyers who were marginally qualified for them. When the interest rates spiked upward, many of those just barely able to stay current saw their monthly payments spike up in kind, often well beyond their ability to pay them.

“During that last big boom, sub-prime lenders lowered their standards to allow people to buy properties they had no business buying,” said Church. “They didn’t think the bottom would fall out as fast as it did and it backfired on them. Some lenders got greedy and wrote tons of mortgages that never had a shot of being paid.”

While the most pressing part of the foreclosure crisis focuses on those in danger of losing their homes, the trickle down will affect those not yet on the homeownership merry-go-round. Faced with mounting losses, banks and lenders are already tightening their standards for new borrowers, making it even more difficult for those marginally qualified to get a mortgage loan.

“There are two parts to this really,” said Church. “First and foremost, there are people losing their homes. Secondary to that, the lenders are tightening their standards to the point there is so much scrutiny, even qualified buyers could find it difficult to get a loan. People that need to buy a new home because of job transfers, or the size of their family is growing, for example, will find it difficult to get loans because of all of this.”

While the foreclosure crisis has been clearly identified, there has been little offered in the way of solutions to the complex problem, although the leadership around the country is starting to take notice. For example, late yesterday, President Bush was expected to announce a rate freeze for certain sub-prime loans for five years in order to combat the soaring tide of foreclosures across the country. The plan emerged after the Bush administration hammered out an agreement with the lending industry to address the growing crisis that could put two million families out of their homes by the end of the year.

Closer to home, the governor’s task force has closely examined the problem and made several recommendations designed to mitigate the impact from changes in state laws regarding mortgage lending, to expanding existing programs to help those homeowners caught in the foreclosure web. O’Malley said this week he will take all of the information presented in the task force’s final report and prepare a comprehensive short-term and long-range solution.

“This report makes it clear that Maryland has not escaped the homeownership crisis confronting our nation and the national trend of rising home foreclosures,” he said. “I look forward to reviewing the report and working with our state, local and federal partners to do all we can to protect our growing middle class by supporting homeownership.”

The task force’s final report makes several specific recommendations including the creation of a homeownership crisis intervention fund to provide case-by-case interventions to prevent foreclosures and potential homelessness; expanding options for homeowners to refinance or restructure mortgages to prevent foreclosure and address affordability; and helping those communities in distress or at-risk due to concentrations of foreclosure activity in their neighborhoods.

The task force also recommends increasing the legal and regulatory oversight enforcement of the mortgage lending industry to strengthen protections for homeowners and ensure the integrity of the lending industry.

“Our financial regulation division, which is responsible for licensing and examining banks, lenders, mortgage brokers and mortgage originators, continues to be on the frontlines of this foreclosure crisis,” said Department of Labor, Licensing and Regulation Secretary Thomas Perez, who co-chaired the governor’s task force. “The division’s compliance unit ensures that licensees meet all legal and regulatory requirements and the enforcement unit investigates complaints of fraud and misconduct.”

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