State fears ‘tsunami’ of failed mortgages

Warning that Prince George’s could see 8,000 foreclosures, Maryland officials urge assistance message

And it’s expected to get worse, state officials said at a conference Jan. 3 with local leaders in Upper Marlboro, where they warned that more than 8,000 county homeowners might face foreclosure this year.

‘‘The tsunami is coming in July and August of 2008,” said Raymond Skinner, secretary for the Maryland Department of Housing and Community Development. ‘‘There are going to be situations where people will have to actually sell their house and move on.”

Officials said the wave of foreclosures stems from the same forces that created record housing sales just years before: subprime mortgages. Unlike traditional loans that require good credit, higher down payments and set a fixed interest rate, subprime loans often had lower ‘‘teaser” rates that shifted to higher payment a few years later.

As a new wave of mortgage-rate increases rolls in this year, officials expect the number of foreclosures to follow suit.

‘‘We’re moving in the wrong direction. The data clearly shows that,” said Tom Perez, secretary for the Department of Labor, Licensing and Regulation. ‘‘We believe it will get worse before it gets better.”

State officials called the meeting after new figures showed the national crisis caused by subprime mortgage defaults was hitting Prince George’s particularly hard.

The 3,310 foreclosures recorded for the first three quarters of 2007 in Prince George’s is nearly double any other area in the state, officials said. Judge Dawson estimated that more than 2,000 foreclosure cases went to court in the last quarter of the year, but final numbers are not yet available.

‘‘This is really a crisis facing Maryland in general, but Prince George’s County in particular,” said Perez, who also said about 8,416 county homeowners were listed as behind on their payments as of September.

Subprime lending was utilized prominently in Prince George’s, officials said. According to McDash Analytics, a mortgage data tracking company, more than 22,000 of the 116,600 mortgage loans in Prince George’s County are classified as subprime.

Last summer, growing numbers of borrowers began to default on mortgages given out in 2004 and 2005, forcing national companies like Citibank and Countrywide Mortgage to declare billion-dollar losses. Though home sales in the county hit their height in the summer of 2005, subprime mortgages were still issued frequently in 2006.

State officials said Prince George’s leaders must persuade at-risk homeowners to seek financial counseling well before they miss their first mortgage payments.

‘‘There are so many people who may be suffering in silence,” Perez said. ‘‘They may listen to you. They may learn from you.”

In addition to national housing hot lines and local seminars sponsored by nonprofit groups, county residents can get counseling referrals through the county housing department at 301-883-HOME.

State officials said they have already given $75,000 in grants to county nonprofit groups to pay for financial counseling services and are investing in a ‘‘lifeline refinancing” program.

‘‘A lot of people may stick their heads in the sand because they’re ashamed,” said Skinner, a Bowie resident. ‘‘But that’s exactly the wrong thing to do.”

Officials also warned homeowners to avoid a proliferation of scam artists trying to profit from the crisis. In some cases, homeowners have signed over their houses to companies who make promises to help but fail to follow through, resulting in eviction or greater debts.

‘‘In a substantial number of cases, the homes could have been saved, but it was too late,” Judge Dawson told the crowd of about 30 elected leaders, state workers and clergy. ‘‘If a deal sounds too good to be true, it is not true.”

E-mail Daniel Valentine at dvalentine@gazette.net.

for referrals

To receive mortgage-counseling referrals, homeowners can call the county housing department at 301-883-HOME.