Foreclosure crisis hits hardest in Prince George’s Co.

Posted: 6:42 pm Tue, December 29, 2009
By Capital News Service

Four homes in pre-foreclosure, two bank-owned properties and one house up for auction in an eight-block stretch of 49th Street in Hyattsville highlight the lingering effects of predatory lending and questionable decisions by homebuyers in Prince George’s County.

More than 30 percent of Maryland’s foreclosures are in Prince George’s even though the county contains just 10 percent of the state’s total housing stock, according to information from RealtyTrac, a private company that records those figures.

Montgomery County and Baltimore City, the next two jurisdictions on the list, have accounted for less than 30 percent of the state’s foreclosures combined.

And, with signs that the overall economy is recovering, 33 percent of Maryland homes that received a foreclosure notice within the last month were in Prince George’s.

The crisis can be explained, in part, by bad lending practices and real estate speculation during the housing boom, according to James Keary, spokesman for the Prince George’s County Department of Housing and Community Development.

“Prince George’s County had the largest growth as far as development in the Washington region in the state of Maryland,” Keary said. “When you have that growth, you have the bad to go along with the good.”

Keary blames many of the foreclosures on “exotic loans” that contained unrealistically low interest rates initially, but ballooned over time.

HomeFree-USA’s chief operating officer, Jim Griffin, has experience helping people whose monthly payments have increased.

“Some adjusted every six months, some in two years; the most problems were the ones that were adjusting every six months,” said Griffin. “In less than a year [owners] could find the house totally out of reach of their affordability.”

HomeFree-USA is a Hyattsville nonprofit specializing in homeowner development and foreclosure prevention. The organization has been bracing for another wave of foreclosures in Prince George’s.

“It seems to be trailing off some, but we do feel there is another round of foreclosure that should be hitting,” Griffin said. “We hope that’s not the case, but I think it will be.”

The prediction is based on the houses bought in the last year of the housing boom that ended in 2006 whose adjustable rate mortgages are scheduled to increase after three years.

Griffin agreed with Keary that real estate speculation is another reason for some foreclosures throughout the county.

“The whole idea was, Prince George’s County was in growth mode and the demand was so great, some people saw it more like an investment,” Griffin said.

While many counties in Maryland saw an increase in houses sold and average house price from 2002 to 2006, Prince George’s County enjoyed significant growth. The average price of a house sold in Prince George’s doubled during that period, while the number of units sold ranked second in the state, according to the Maryland Association of Realtors.

Real estate speculators thought they could always sell the property at a profit if they could no longer afford the monthly payments, Griffin said. However, housing prices in Prince George’s have dropped 19 percent since December 2008.

The Prince George’s County Association of Realtors declined to comment, saying it had not done any research on foreclosures in the area.

In response to Prince George’s foreclosure difficulties, nonprofits like HomeFree-USA and government agencies such as the Department of Housing and Community Development have increased their focus on preventing foreclosures while ensuring that new homebuyers shop responsibly.

Besides preventing future foreclosures, Sen. Barbara Mikulski, D-Md., wants to punish those who encouraged the “exotic” loans. On Dec. 9, Mikulski included $75 million to expand the Mortgage Fraud Task Force division of the FBI in an appropriations bill for Fiscal Year 2010. The funds will help crack down on predatory lenders who have contributed to Maryland’s ninth-ranked foreclosure rate.

“It’s time to foreclose on the bad guys and stop the foreclosures on homes,” Mikulski said. “Like most Americans, I am outraged by the predatory practices, deceptive marketing and lending schemes that have swept across the country and especially in Maryland.”