County and state officials signed an agreement Tuesday to give $4 million to help about 250 county homeowners refinance their mortgages.
The fund, set up under the state’s HOPE initiative, is designed to pay banks up to 40 percent of the losses they would take by refinancing mortgages for struggling owners in Prince George’s County. A similar agreement was made in Montgomery County in May.
The partnership comes as Prince George’s County continues to lead the state in past due and lost homes. An April report by the Department of Housing and Community Development found that more than 3,300 county houses were listed in some state of foreclosure through March 2008, making up nearly a third of the state’s 11,300 total home loan defaults for that period.
The new fund is designed primarily to help homeowners with subprime or adjustable-rate mortgages – two unconventional types of home loans that often feature high interest rates or bills that jump after a set period.
‘‘The product — subprime or adjustable-rate mortgages — is risky in the first place,” said Lisa Butler McDougal, executive director for Sowing Empowerment and Economic Development Inc. ‘‘They provided short-term gain to the homeowner but negative long-term effects. That’s why they no longer exist.”
SEED is a nonprofit organization that serves as an intermediary for homeowners, McDougal said. They open dialogue between homeowners experiencing difficulty to pay their mortgage and lenders.
Economists say the proliferation and collapse of subprime mortgage loans has sunk the nation’s financial industry. Until the slump hit last year, rising home prices and raging commissions drove lenders to issue unusual mortgage loans to thousands of people – many of whom were unable to afford them in the long run.
Beginning in 2005, people began defaulting on mortgages at high rates, leading to widespread foreclosures. The wave of bad loans has spooked the lending industry, making it much harder for people and businesses to access loans.
High suburban home prices and borrowers with less-than-perfect credit further drove subprime lending in Prince George’s, where analysts have said about 19 percent of the 116,600 mortgage loans in the county are classified as subprime.
Prince George’s County had more than 6,000 foreclosures in 2007, which is expected to reach more than 8,000 in 2008. Hyattsville, Bowie and Upper Marlboro are among the worst affected, though foreclosures are scattered throughout the county.
The fund set up Tuesday, known as HOPE – Home Owners Preserving Equity – calls for Prince George’s County to pay $1.5 million, and the state to pay $2.5 million to the local loan program for people facing foreclosure.
To qualify, homeowners must still be current on their mortgages and have a credit score of at least 550, said county spokeswoman Denise Roberts.Ê The refinancing loans are targeted for mortgages between $435,000 and $530,000.
‘‘Up to $535,000 is the max available,” said Raymond Skinner, secretary of the Maryland Department of Housing and Community Development.
The fund should be enough to cover at least 266 homes, Roberts said.
‘‘We can probably do close to 300 homes,” Skinner said. ‘‘The size of the mortgage depends on what we can do.”
Sata Grice Nyemah of Riverdale was eight months late on her mortgage payment and lenders refused to speak with her until she contacted the SEED, which contacted her lender.
It is because of SEED’s efforts that she has been able to stay in her home, Nyemah said.
Nyemah has also turned to the HOPE hotline for help.
‘‘I needed more action than a telephone conversation [with HOPE],” Nyemah said.
Officials again urged homeowners who may be having trouble making payments to seek help as soon as possible. State officials are referring people who call the state hotline at 877-462-7555 to credit counselors and loan assistance programs.
‘‘This really works,” Nyemah said. ‘‘Don’t give up hope because there is hope, there are results.”
Staff Writer Elizabeth Skalski contributed to this story.
E-mail Daniel Valentine at dvalentine@gazette.net.
