Wednesday, April 2, 2008

County foreclosures will keep going up, experts predict

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Montgomery County’s foreclosure problem is only going to get worse, housing experts told the Montgomery County Council on Tuesday.

The county had 4,554 homeowners with delinquent home loans in addition to 1,726 homes already in foreclosure through February, according to a state Department of Housing and Community Development report.

Montgomery County is second in the state to Prince George’s County in the number of delinquent loans and foreclosures.

Councilman Philip M. Andrews asked when the housing experts expected the foreclosure crisis to peak.

‘‘I honestly don’t know,” said Clarence Snuggs, deputy secretary of the Maryland Department of Housing and Community Development.

The peak of adjustable rate mortgages resets is set to occur in September, he said. A reset of an adjustable rate mortgage can cause the monthly payment to go up often beyond what the homeowner can afford, leading them to become late on their mortgages and eventually into foreclosure.

The effects of the resets have already been felt by many homeowners.

‘‘I don’t know when we’re going to come out of the tunnel,” Snuggs said.

In Montgomery County, the foreclosure rates keep rising. Silver Spring has 471 homes in foreclosure, roughly 1.3 percent of all loans, followed by 349 in Gaithersburg, 1.5 percent of all loans, 349 in Germantown, 2 percent of all loans, 311 in Rockville, nearly 1 percent, and 154 in Montgomery Village, 2 percent of all loan, according to the state study.

Countywide, 1,726 homes are in foreclosure. Roughly half of the homes in foreclosure had adjustable rate mortgages.

‘‘A lot of families didn’t fully understand ARMs and resets and didn’t understand that it would go up,” said Rick Nelson, director of Montgomery County Housing and Community Affairs. ‘‘That’s a significant hit on their budget. You’ve got to get to these families before the notice is put on the door.”

From 2005 to 2006, there was a 33 percent increase in foreclosures in the county and from 2006 to 2007 the number shot up to 77 percent.

‘‘This situation is not only a crisis for Maryland, but a crisis for the nation and the international financial markets,” Snuggs said.

The state has invested $100 million to help homeowners in a short-term crisis to obtain a loan to bridge them from losing their homes while they obtain new mortgage terms from their lenders, Snuggs said.

However, only half of the people facing foreclosure call their lenders to try to renegotiate, Snuggs said.

The homeowners tend to blame the lenders for getting them into unfavorable mortgage terms that put them in a bad situation and don’t trust the lenders to work with them, Snuggs said.

But with so many homes facing foreclosure, many lenders are more likely to renegotiate rather than foreclose on the home, he said.