Economist: Record foreclosures could hit Maryland

BALTIMORE — Maryland's foreclosure rates have been among the lowest in the country, but a local economist says the worst is still to come.

Anirban Basu warns of increased "blood in the water" as the impact of the housing downturn hits the state.

"Thus far the rate of foreclosures in Maryland has not had an effect overall because we have not yet seen a period of elevated foreclosure rates," said Basu, chief executive of Sage Policy Group, an economic consulting company in Baltimore. "However they are rising fast and the worst period is in front of us, not behind."

So far, Maryland has avoided the record foreclosures on both the prime and subprime markets in other parts of the country. (www.delmarvanow.com)

"Maryland's foreclosure inventory rate of .5 percent and new foreclosure rate of .31 percent are well below the national rates of 1.19 percent and .57 percent," said Doug Duncan, chief economist and senior vice president of research at the Mortgage Bankers Association.

Basu told The Baltimore Examiner that the increase in housing stock in Maryland is due to "the resettling of adjustable mortgage rates and the fact that people can't make those high interest payments. In addition, people over did it on the amount of debt they took on, not only with homes, but car and credit card debt and loans with has translated into increased delinquencies, and sadly, involuntary (foreclosure) home sales."

The Maryland Bankers Association says that while nearly 70 percent of Americans own their own homes, many that qualified did so with adjustable rate loans or subprime loans whose high interest rates borrowers can no longer afford.

"The regulatory environment is shifting," said Basu. "Borrowers who could have accessed credit in 2002-2003 can't anymore. The subprime market is virtually shutdown. If the state's economy falters and unemployment rises there will be increased blood in the water in respect to foreclosures."