Struggling to hang onto homes

Each day when the mail arrives at her northeast Baltimore home, Fran Brunson is filled with dread. The 50-year-old grandmother is two months delinquent on her mortgage, and has been receiving letters that a foreclosure is forthcoming.

“I’m just trying at this point to stay in the home,” she said Tuesday. “However, it gets harder and harder. Time is against me now.”

Brunson, a U.S. postal worker on medical leave, is not alone. She is one of thousands of homeowners in the Baltimore area facing foreclosure as the housing crisis hits full stride amid a crippling recession.

Housing experts are scrambling to stave off foreclosure-based evictions and aid families in crisis, while others are monitoring the sale of newly vacant properties to investors, which could set off another frenzy of house flipping in Baltimore.

This month, the Mortgage Bankers Association released figures showing that Maryland home loans in foreclosure had increased 115 percent in the final quarter of 2008 compared with the corresponding period in 2007. More than 100,000 home mortgages were delinquent by at least one month or in foreclosure by the end of 2008.

“The foreclosure rates are only continuing to go up,” said Joe Cox, an official with ACORN, a national nonprofit advocacy group that is working to help local families stave off foreclosures.

Cox is preparing to testify March 24 before the Baltimore City Council on proposed legislation that would allow a 365-day grace period for foreclosure evictions. That grace period is designed to allow homeowners to negotiate mortgage modifications, said one of the bill’s sponsors, District 14 Councilwoman Mary Pat Clarke.

The hearing is expected to be packed with people on both sides of the controversy, Cox said.

High emotions are swirling around the foreclosure crisis; nationally, 12 percent of homeowners were behind on mortgage payments at the end of December. Rising joblessness, the subprime mortgage crisis and the banking crisis are all blamed for the mess, which has left millions of U.S. families reeling and many dealing with homelessness for the first time.

Robert J. Strupp, an attorney and director of research and policy for the Community Law Center, said that in addition to monitoring appraisals of residential properties in the city, he’s researching housing transactions to determine if investors are engaging in “flipping” ― buying low to quickly sell high. Critics say this destabilizes communities that are already struggling with vacant properties and absentee landlords.

“Properties are being acquired in increasing numbers by investors,” Strupp said. Last year, a third of all foreclosure filings in the city were on homes not lived in by their owners, he said.

Proponents of the foreclosure grace period bill say the legislation is needed to reverse foreclosure evictions that, legally, can take place within a month of court action.

“This is really only going to affect lenders who are trying to make a mortgage work, to renegotiate with homeowners,” Cox said. “It is going to cut down on vacancies in Baltimore. Local government has to go to this measure in reaction to the crisis we’re in.”

But mortgage experts call it bad legislation that could allow delinquent homeowners to stay in their homes for up to 12 months without making any payments.

“When you give them a free ride for 12 months, that’s not reasonable,” said Thomas Shaner, executive director of the Maryland Association of Mortgage Brokers. “It’s not good government. I project that no bank will do loans in the city of Baltimore. While it’s intended to help people, it will hurt people in the long run.”

Shaner said low interest rates are attracting qualified home buyers in the metropolitan area this spring, a sentiment echoed by Coldwell Banker real estate agent Melvin Knight. This week Knight cited 45 houses now under contract in Canton, 41 in Federal Hill and eight in Fells Point as evidence of a city housing turnaround.

But Shaner said those facing foreclosure will have difficulties modifying their mortgages because of spotty credit histories from their foreclosure battles and declining equity because of the housing crisis.
“You’ll have to have a good credit score and have a certain percentage of ownership in the house,” he said of those seeking a mortgage modification. “If you bought on interest only, and have no equity, it’s going to be hard.”

One of those homeowners is Brunson. She bought her small white house in November 2005 for $155,000. She negotiated an 80/20 mortgage, meaning 80 percent of the loan held an adjustable interest rate, while 20 percent was fixed at a 12 percent interest rate. Her monthly payments were $1,275, and she intended to refinance within two years. But she said the refinancing cost her $9,000 in unanticipated insurance and closing fees, ending up in a new mortgage payment of $1,477.83.

“The payments got so high, I could barely keep up,” said Brunson, whose daughter and grandson live with her. “It was the snowball effect and I’m in a bind now. It is a lot of stress.”

Melody Simmons is a freelance writer based in Baltimore.