Foreclosure fallout: Rescue scams

Scammers are taking advantage of mortgage holders at their most vulnerable - when they're about to lose their homes.

NEW YORK (CNNMoney.com) -- Jennifer Falke and her family had been in their Columbus, Ohio, home for nearly 12 years when they hit a rough patch in 2006. Falke was out of work and fell behind on the mortgage.

Falke said a flood of mailings and flyers then arrived at her door promising help from foreclosure rescue companies claiming to act as an intermediary between her and her lender to keep her from losing her home.

According to Falke, the company she contacted, Foreclosure Assistance Solutions (FAS), simply took her money and did nothing for her. And by delaying a workout with her lender, it made getting back on track harder and more expensive.

"I called the company, thinking it was the best thing I could do," she said. "They told me they could help. But one of the first things they said was, 'Don't call your mortgage company. If you do they'll tack on fees.'"

For a $1,200 payment, according to Falke, FAS claimed it would handle everything, including calls to the lender, but she charges it did nothing.

"Every time I got enough together to pay off the arrears, they would say the amount had increased." Falke received an income tax refund that she wanted to put toward a payment. But according to her, FAS said her mortgage company said it wasn't enough.

"Then they stopped answering my calls. I would leave a message every day," Falke said. "One day, they told me, 'We're dropping your case' and hung up on me."

Only then did she call her lender. Falke found out the payoff was less than what FAS had told her - $2,600 instead of $3,500. And then she learned that the bank had dealt with many cases like hers.

"To prey on people at one of the most vulnerable points in their lives is despicable," said Ohio Attorney General Mark Dann, who filed suit earlier this month against six foreclosure rescue companies, including FAS, who he claims snared Ohio residents in their webs.

FAS did not return a phone message asking for comment.

As foreclosure rates rise, evidence from other parts of the country indicates the number of rescue scams may be increasing. According to Alison Preszler, a spokeswoman for the Council of Better Business Bureaus, the BBB for Clearwater, Florida, received 508 complaints about local foreclosure rescue companies in the past three years with 322 coming just within the last 12 months.

Charlotte, North Carolina's BBB office reported last year that two foreclosure rescue companies were operating; today the count is 15 and six have already had legal actions taken against them. Twenty-one new companies began operations this year in Cleveland.

According to Dann, the most common form of foreclosure rescue scam in Ohio is like the one Falke claims was used on her. A scammer takes an up-front fee, usually $1,000 or more, to solve the victim's foreclosure problems, and then does little or nothing, pocketing the money.

Dann said victims are often low-income minorities, the elderly or immigrants in poor neighborhoods, but anyone can be targeted.

The most vulnerable members of society often make the easiest marks. A client of Jessica Attie of South Brooklyn Legal Services, was a mentally ill woman with a $60,000 mortgage balance that carried an interest rate of more than 10 percent. She was falling behind on payments, had few other resources and wanted to reduce her payments.

Attie said a scam artist convinced her client to sign over her title while he cleared up the arrears. She could rent the home for six months, and then he would sell it back to her. Instead, according to Attie, the scammer resold the house and absconded with more than $400,000.

Michael Sichenzia knows mortgage rescue scams from the inside out; in 2002, he was convicted and served hard time for mortgage fraud at the Attica Correctional Facility in New York State. Today he's an investigator for the Deerfield Beach, Florida law firm, Glinn Somera & Silva and chief operating officer of Dynamic Consulting Services, specializing in financial fraud.

According to Sichenzia, the most common foreclosure rescue scam has always been "equity stripping."

"The scammer promises to save the home by taking title," he said, "renting it to the owner and selling it back sometime later. Instead, he strips the equity by charging excessive fees, doing phony renovations and not making the mortgage payments."

Sometimes the home owner is fully aware that the title is changing hands, counting on the promise to be able to redeem it later. But other times the scammer tricks the owner.

"The signing over of title is buried in an avalanche of paperwork or in the language of the contracts," said Sichenzia.

Duane Legate, who runs Housebuyernetwork.com, which arranges short sales for homeowners in trouble and also offers foreclosure prevention advice, said, "There's only a handful of legitimate companies out there, ones that really do try to help clients. The rest are just looking for a quick payoff."

According to Legate, the scammers are multiplying so rapidly that there's even a company that sells foreclosure rescue Web sites, complete with testimonials from smiling, satisfied clients.

Here are some of the tactics that scammers are known to use:

* Saturation marketing: They learn of mortgage delinquencies through published reports and proceed to bombard the owners with phone calls, flyers and posters.
* Exploiting trust: Scammers build trust by acting sympathetic and solicitous; many owners can't believe they would lie to their faces.
* Isolating owners: Scammers assure victims that they'll handle everything. They tell them not to call their lenders nor seek legal advice.
* Outright fraud: Scammers have homeowners sign blank papers and fill them in afterward or they sneak the paperwork through without telling victims what they're signing.
* Affinity marketing: Especially among minorities and sometimes evangelical church congregations, a scammer builds trust based on a common ethnicity or religion.

According to Dann, you should never trust anyone who has contacted you, unsolicited, offering to help. "There are no boundaries to entry for any entrepreneurial criminal to get into these scams."

The best thing to do is to call your lender and try to work out a plan. If in doubt, get in touch with your state attorney general's office. It can put you in touch with a Housing and Urban Development-approved free credit counseling service that will do you a lot more good than fee-based rescue services.

Jennifer Falke was able to work out a settlement with her bank. She's back to work and current with her mortgage payments, but she is out the $1,200 she paid to FAS.

"The ingenuity of people who would rather cheat than work hard is unending," said Dann. (http://money.cnn.com)

756 to share $1 million in housing settlement

Advocates for the disabled announced yesterday that 756 people are in line to share $1 million from the settlement of a Baltimore housing discrimination lawsuit.

A victims' compensation fund was established as part of a landmark 2004 settlement in a lawsuit alleging that thousands of people with disabilities were intentionally or illegally excluded from public housing. Other terms of the settlement, worth more than $100 million, include development of more than 1,000 units of public housing accessible to people with disabilities and a program to help them obtain housing.

The parties in the lawsuit - the Maryland Disability Law Center, the U.S. Department of Justice and the Housing Authority of Baltimore City - jointly filed in U.S. District Court yesterday a recommendation to compensate the 756 people. Both the law center and the justice department had sued the housing authority.

Last summer, officials mailed 40,000 notices to potential housing discrimination victims, urging them to take advantage of the compensation fund. Soup kitchens and shelters also held informational meetings about it. About 2,500 claims were filed, said Lauren Young, the disability law center's legal director.

Assuming the court approves the arrangement, each of the identified victims will receive about $1,300 sometime in the next few months, Young said.

"These payments are given to individuals in recognition that their civil rights were violated based on their disabilities," she said in a statement.

Among those recommended for compensation are people who were denied housing because they used wheelchairs, and a person who had requested grab bars and fell repeatedly in the shower.

University of Baltimore's law school is planning to offer financial counseling sessions for recipients of the money. (baltimoresun.com)

Behind on your mortgage? Ask for help right away

Don't wait until you become delinquent on your mortgage payments or are facing foreclosure before seeking help.

That's the key advice from housing counselors in the Baltimore area, who are trying to get struggling homeowners out from under ballooning mortgage payments.

"The moment they're falling behind, or think they're falling behind, call us immediately," said Ashidda Khalil, director of the Baltimore office of the Neighborhood Assistance Corp. of America, a nonprofit housing advocacy group. "Because for some reason they became afraid, and don't talk to the lender, it gets out of control."

There are several options for Marylanders, especially subprime borrowers, who housing counselors say have seen their monthly payments double in some cases as interest-only or adjustable-rate mortgages (ARMs) reset.

During the housing boom, many buyers stretched to buy a home before prices rose higher. They sought subprime mortgages because they meant lower payments in the first few years.

In addition, lenders made more subprime loans, typically at higher interest rates, to people with spotty credit records.

During 2004 and 2005, subprime loans nearly tripled, according to the Federal Reserve.

But now, as home values flatten or even decline and higher interest rates kick in, many homeowners can't keep up. Those with little or no equity are finding it tough to find new, fixed-rate loans or even sell the house for what they owe.

The state and some nonprofit organizations offer refinancing options for homeowners in dire situations. Many have eligibility requirements, such as income limits.

$1 billion in refinancing
Neighborhood Assistance, for instance, recently announced a commitment of $1 billion to refinance loans of people at risk of losing their homes.

To qualify, homeowners have to have subprime mortgages with interest rates of 10 percent or higher, Khalil said. They can refinance into a 30-year loan with a fixed rate that is 1 percent below market. So far, Khalil said the group has helped several Baltimore homeowners refinance and prevent foreclosure.

Neighborhood Housing Services of Baltimore Inc., a nonprofit group whose mission includes providing affordable housing, offered $1 million to refinance loans between January and May but then ran out of money because of the high demand.

The organization expects to have financing again in October.

Neighborhood Housing also offers emergency loans of up to $5,000 to help homeowners through tough months. The foreclosure process is quick in Maryland and the loans help people buy time, the group said.

"The idea is to forestall things for a limited amount of time and give homeowners time to fix the problem," said Felix Torres, the group's executive director.

"The customer that we were able to refinance basically had subprime loans they couldn't afford," Torres said. "In some cases they could barely afford it, and they were facing interest rates that were just going to push them over the edge."

Funding exhausted
The Community Assistance Network in Dundalk, too, recently exhausted its limited funding to help homeowners avoid delinquency and foreclosures, said Jon Brown, the group's sole housing counselor. The maximum grant is $450, and homeowners would have to provide the difference to bring payments current.

Marylanders also may qualify for the state's new Lifeline Refinance Mortgage program.

The loans, which have income limits, currently carry an interest rate of 6.5 percent.

Lifeline has about a dozen loans in the pipeline and has had about 600 inquiries since June. Officials expect to see an even bigger wave next year when more adjustable-rate mortgages reset, said Russell Thomas, a spokesman for the Department of Housing and Community Development, which administers the program.

Aside from financial help, nonprofit groups provide free counseling. Housing counselors can work with lenders to review options, such as lowering the interest rate.

"We're calling lenders and asking them to modify the loan so this person can continue to live in their home and raise their family," said Khalil of the Neighborhood Assistance. "We're pleading with lenders."

The St. Ambrose Housing Aid Center Inc. is on track this year to see nearly triple the amount of people it normally helps, from 700 to over 2,000 clients. The center said many homeowners had adjustable-rate loans and are now being squeezed. Others got into houses they couldn't afford. Many are coming in too late.

St. Ambrose will contact a homeowner's lender to see if better financing terms can be worked out. The center can also refer people to refinancing programs. It helps to sell the properties if it's too late to save them.

"Many of the families are already behind on their mortgage payments and the options become fewer and fewer," said Lisa Evans, deputy director of St. Ambrose. "People need to come in before their ARMs adjust and before their interest rates increase."
Where to seek help

Here are some places where homeowners struggling to make mortgage payments can turn to for help or further referrals:

• Lifeline Refinance Mortgage Program

A state program that provides refinancing. http://www.dhcd.state.md.us/Lifeline/ 877-462-7555

• St. Ambrose Housing Aid Center Inc.

Offers free counseling and referrals http://www.stambros.org/ 410-366-8550

• Neighborhood Housing Services of Baltimore

Provides emergency loans. It expects to have new funding available for refinancings in October. 410-327-1200

• Neighborhood Assistance Corp. of America

Offers a refinancing program and homeownership counseling. https://www.naca.com/index_main.jsp 410-783-0465

• Maryland attorney general's office

List of foreclosure counseling services http://www.oag.state.md.us/Consumer/foreclose.htm

• Homeownership Preservation Foundation

Hotline for homeowners in danger of facing foreclosure to connect with a U.S. government-approved counselor. Call 888-995-HOPE (4673). (baltimoresun.com)

Home sales slump in Md.

21.1% fewer sold in spring; prices in area hold up

Maryland's housing market took a beating in the spring selling season, recording one of the biggest drops in sales in the nation.

Homeowners in the state sold 21.1 percent fewer homes during the second quarter than they did a year earlier, the National Association of Realtors said yesterday. That was nearly double the 10.8 percent drop for the nation as a whole. The numbers, which track existing homes, are annualized and adjusted for seasonal variations.

Despite the steep sales decline, pricing in the Baltimore metropolitan area held up. The median price of a single-family home gained 3 percent in the April-June quarter over the same three months a year earlier, according to the association. Nationally, prices fell 1.5 percent.

The slump in sales in the April-June period preceded the current turmoil in the mortgage industry, which was ignited by failures in subprime loans made to buyers with shakier credit. Now, as foreclosures mount and more lenders go out of business, it has become harder to qualify for a mortgage, narrowing the pool of potential buyers.

That's a sharp contrast to what happened during the housing boom, when relaxed lending standards and the proliferation of adjustable-rate, interest-only and other nontraditional loans led to rising sales and prices.

"All of us were on a nice bubble, and everybody was waiting for that bubble to fizzle," said Thomas C. Shaner, executive director of the Maryland Association of Mortgage Brokers. "Well, it popped."

Lawrence Yun, senior economist with the National Association of Realtors, thinks prices in the Baltimore area are holding up because the economy continues to create high-paying jobs.

"There's not a panic in the market," agreed John McClain, senior fellow at the Center for Regional Analysis at George Mason University. "There are still people out there who need to live here because we still have job growth."

But sales might be better if prices were dropping.

Maryland home prices doubled from 2000 to 2005, an unusually big gain even for the U.S. boom years. Incomes didn't rise nearly as fast. With half the homes now selling for more than $325,000, some would-be buyers just can't make the numbers work.

"Affordability has been eroded," said Celia Chen, director of housing economics for Moody's Economy.com. "If prices are not falling off, that's going to constrain sales."

She thinks the local housing market probably won't improve until the middle of next year, and that's assuming no more nasty surprises.

"Conditions can easily become much worse than we expect because of all the issues arising right now in the mortgage markets and financial markets," Chen said.

Only Florida, Nevada, Arizona and Tennessee saw bigger decreases in second-quarter sales than Maryland. Florida - a state that, like Maryland, recorded some of the biggest price increases in the country during the housing boom - had a 41 percent slump in sales.

In all, 41 states plus the District of Columbia recorded declines.

Maryland's annualized sales pace in the second quarter was just under 93,000 home sales, compared with about 118,000 the same time last year, the National Association of Realtors said.

Existing homes aren't the only part of the market feeling the pinch. The National Association of Home Builders said yesterday that its index of builder confidence for August fell to its lowest level since the recessionary days of January 1991. Builders say the credit crunch is causing problems not only for borrowers with shaky credit but also for prospective buyers who need "jumbo" loans of more than $417,000.

It's hardly helpful for expensive markets such as Howard County. Nearly half the existing homes in Howard are selling for more than that price, let alone the big new homes.

"That's a scary thought," said Pat Hiban, an associate broker at the Pat Hiban Real Estate Group with Keller Williams Realty in Ellicott City. With interest rates on jumbo loans rising, some would-be buyers are reconsidering whether to purchase a home, he said.

Yun said mortgage troubles will hold back demand during the short term. But he said the subprime bust has propelled buyers with less-than-perfect credit back to loans insured by the Federal Housing Administration, a segment of the financing market that was all but abandoned during the go-go days of the boom.

He expects small gains in prices in the Baltimore area in the near future.

Yun noted signs of nationwide improvement in prices during the second quarter with 97 metropolitan areas out of 149 showing year-over-year gains in price, up from 83 in the first quarter and 68 in the fourth quarter of last year.

But Chen thinks some of the second-quarter increases were artificially high. Median prices might have been skewed upward by a drop-off in sales of cheaper homes, she said, because the subprime market was in trouble before interest rates rose for jumbo loans.

"The lower end of the housing market is falling off quickly, more quickly, because of all the problems of the subprime lending market," Chen said.(baltimoresun.com)

Housing needs

A recent report from the federal Department of Housing and Urban Development shows that increasing numbers of the nation's poor are spending more of their income on rent while also waiting longer for federal subsidies. The report reflects the worsening crisis in the supply of affordable housing, a shortage that is certainly being felt in Baltimore.

Steps are being taken here to deal with the problem, but far more needs to be done.

Nearly 6 million households nationwide met HUD's definition of worst-case housing needs in 2005 (the latest available data), meaning that those families and individuals made less than half of an area's median income, received no rental assistance and paid 50 percent or more of their monthly income for rent or lived in substandard housing. The number had increased by 817,000 households since HUD's last tally, in 2003, a 16 percent jump.

A bill passed recently by the House of Representatives' financial services committee could help. It would establish a National Affordable Housing Trust Fund aiming to give states and localities up to $1 billion a year to produce, rehabilitate and preserve 1.5 million housing units for low-income families in the next decade. It's a worthy idea, but it's also been on the drawing boards for several years. Congress should push for affordable-housing relief with more urgency.

In the meantime, cities like Baltimore cannot wait and need to act on their own. From 2000 to 2005, housing prices in the city doubled while wages increased only 19 percent (a disturbing trend reflected nationwide in the HUD report). A 2005 analysis of the rental market found a shortfall of nearly 26,000 affordable units for households making less than half of the area median income, and nearly 45,000 units for households making less than 80 percent of area median income.

The City Council has passed an inclusionary zoning law that requires developers receiving large city subsidies to set aside 20 percent of units for affordable housing. It has also created an affordable-housing fund, putting in nearly $60 million over multiple years to increase the supply of affordable units. Still needed is a more comprehensive and coherent plan that should include even more investment of city dollars and a greater commitment to develop and restore more affordable units as well as provide more housing vouchers for low-income families.

Baltimore has taken some important steps, and for the next fiscal year the city is slated to get some additional federal funding. But a long-term shortfall in federal housing dollars also needs to be reversed, so that Baltimore and other cities don't have to run so much harder and faster to get ahead of the affordable-housing crisis. (baltimoresun.com)

Md. mortgage program thriving

Nearly 4,000 turned to the state last year for $767 million in low-interest home loans.
Here's a mortgage program that's not in trouble.

Nearly 4,000 homebuyers turned to the state for their home loans last fiscal year, a record for Maryland's 28-year-old loan program at a time of increasing disarray in the mortgage industry.

The state made about $767 million in low-interest loans to buyers, almost all of them purchasing their first home, in the 12 months that ended June 30. That's three-and-a-half times the amount it lent the previous fiscal year - and far above the $269 million record set in the 1995 fiscal year.

Stephen D. Silver, the state Department of Housing and Community Development's chief financial officer, credits timing for the big jump in demand.

The state expanded its "More House 4 Less" offerings a few years ago from a single product to several - 30-, 35- and 40-year mortgages including interest-only loans - but word filtered out slowly.

Meanwhile, first-time homebuyers found their private mortgage options shrinking this year as foreclosures rose and lenders, stung, backed away from borrowers with shaky credit or little money to put down.

"I'm sure we are picking up some people that were being steered toward subprime," said Silver, referring to loans aimed at borrowers with credit problems.

Thus far, the state has fewer delinquent loans than do lenders with mortgages in Maryland insured by the Federal Housing Administration, the state housing and community development agency said.

The state's loans have below-average interest rates - about 6 percent last fiscal year while the market rate was closer to 6.5 percent. Borrowers are also eligible for assistance with down payment and closing costs.

The products are all fixed rate. "We wanted to make sure our borrowers were getting something with no surprises," Silver said.

The state made 3,882 loans last fiscal year, triple the number a year earlier. Though that's a fraction of all new loans, it's a hefty increase at a time of slumping home sales.

Home values, which remain high, are part of the reason homebuyers would flock to a program that offers down payment and closing-cost help. Many first-time buyers are hard pressed to put even 5 percent down. With average sales prices in Maryland at $380,000, a 5 percent down payment would equal $19,000.

Ryan W. James, senior mortgage banker with First Horizon Home Loans in Timonium, said the More House 4 Less loans - sometimes called "CDA" because they're handled by the state's Community Development Administration - have grown in popularity as the state made it easier and quicker to get one.

"CDA had a bad reputation for a long time," said James, who said he now does 10 to 15 of the loans a month and said the processing time is much faster than it once was. "What took weeks with CDA now takes days. ... That helped a lot."

The average More House 4 Less borrower got a loan equaling 99 percent of the value of the home. Nine out of 10 participants got down payment assistance, closing-cost help or both from the state.

Borrowers had to be buying either for the first time or in targeted areas, such as Baltimore City. The average borrower had a household income of about $55,000 and purchased a home priced at almost $200,000.

The state housing agency, which finances its loans with mortgage revenue bonds, said it hasn't run into trouble getting money as investors abandon other parts of the mortgage market. Silver figures that's because the bonds are rated AA and are mostly tax-exempt, and because all the mortgages the state approves have either private or government insurance. (baltimoresun.com)

Jury awards $4 million in lead case

Damages could be reduced under state-cap law, attorney for city housing authority says.

A city jury has found that the Housing Authority of Baltimore City should pay $4 million in damages to two siblings poisoned by lead paint in their publicly owned rowhouse in the 1980s.

The verdict - issued Thursday - directed $2.5 million to Joseph Avery Jr., 23, of the 3000 block of Rosedale Court and $1.5 million to his sister, Lisa Avery, 21, of the 1700 block of McCulloh St.

The family filed suit against the housing authority in 2005.

The damages could be reduced to a maximum of $350,000 for each sibling under the state payment caps in place at the time they were tested for lead poisoning, said J. Marks Moore III, the attorney for the housing authority's insurance company. The city may appeal the verdict.

But Bruce H. Powell, the Averys' attorney, said he plans on challenging the state cap in a post-trial hearing Aug. 29.

"You have a right to a jury trial, and you have a right to what the jury awards you," Powell said. "The jury thought that they were compensating these people in a way that was fair, and that's not the case."

Lead poisoning, which often occurs when children ingest chipped household paint, can cause mental problems, including cognitive deficits and aggressive behavior.

At the four-day trial, a vocational rehabilitation expert testified that the Avery siblings show symptoms of lead poisoning. Both were in special education, and neither earned a high school diploma.

Last year, 1,274 children in Maryland had lead poisoning, according to statistics from the Maryland Department of the Environment.

That figure includes 936 newly reported cases, 573 of which occurred in Baltimore.

As more research has emerged highlighting effects of lead poisoning, the amount in damages paid by property owners has increased, Moore said.

Since the early 1990s, Moore has handled at least 200 lead poisoning cases for the housing authority, with 10 reaching trial. When he started, a typical verdict ordered $200,000 in damage payments, he said.

"Now, you see just about all of them in the millions," he said. "They really don't have a basis in relation to the underlying facts of the case. I think they're excessive."

The housing authority deferred questions about its lead poisoning cases to Moore.

Ruth Ann Norton, executive director of Baltimore's Coalition to End Childhood Lead Poisoning, said that most current cases of childhood lead poisoning can be blamed on private landlords rather than public housing.

Many city houses built through the 1950s included lead paint. Since it was banned nationwide in 1978, the city has worked to repair lead-tainted houses it owns and reach out to poisoned children, Norton said.

"There has been much progress made there in the intervening 20 years, and so a child living in city-owned housing today would have hopefully a much different experience," she said.

The Averys' mother, Trina Ashley, moved into a Gilmor Homes rowhouse on Bakbury Court in 1984, shortly before giving birth to Joseph. The housing authority had built the home in 1940 with specifications that indicated that lead paint was used.

While living in the home, Ashley repeatedly complained about flaking lead paint, Powell said. In 1986 and 1987, the children were tested for lead and found to have levels that were acceptable at the time but later considered poisonous by Centers for Disease Control and Prevention standards.

In 1988, the Health Department tested the home for chipped lead paint and found it in five locations.

The only location where the lead concentration exceeded acceptable amounts was the front door, and whether the now-deceased surveyor's report indicated lead had been found in the other locations was a trial issue.

A month after the house was tested, the family moved. (baltimoresun.com)

Unsold homes swell to record in region

Stacey Wooden and her husband, David Schreiber, have had their Mount Washington home on the market for four months. The couple initially listed their home for $769,000 but eventually dropped the price by almost $70,000.

Home prices flattened in July in metropolitan Baltimore, as unsold houses swelled to a record and buyers faced tightening credit from a distressed mortgage industry.

The average price of a home in the region rose less than half a percent to $331,053 last month from $329,855 in July 2006, according to Metropolitan Regional Information Systems Inc., a Rockville multiple-listing service.

Average prices rose as much as 4.2 percent in Carroll County and 3.5 percent in Baltimore City, but were down slightly in Anne Arundel, Baltimore and Harford counties and flat in Howard County.

As the number of homes on the market mounted, buyers were being forced to cut prices to make a sale happen.

At the same time, buyers - some with good credit - are finding their home loan options more limited as lenders pull back in light of problems in the subprime market.

"The pool of buyers has been shrinking," said Gail Feirstein, an agent with Coldwell Banker in the Annapolis Plaza office. "The mortgage market has created more of a gap for buyers who want to buy a house. Programs with 100 percent financing are on hold right now, and first-time homebuyers have to stretch more. That makes the whole move up market more difficult."

Earlier this week, a report by the National Association of Realtors predicted that home sales nationally likely will fall 6.8 percent to 6.04 million this year, a five-year low.

"Mortgage disruptions will hold back sales over the short term, but long-term fundamentals are favorable," with a modest upturn expected by the end of the year, predicted Lawrence Yun, a senior economist with the Realtor's association, in the report.

Prices have been falling across the nation, said Celia Chen, director of housing economics for Moody's Economy.com.

"Baltimore prices are holding up a little better," she said. "There's certainly weakness all over the country. It's getting more difficult to get financing for homes, particularly for those buyers who don't have very good credit ratings. The subprime segment has obviously collapsed, and very few lenders are now originating loans for subprime borrowers."

Subprime loans are made at higher interest rates to borrowers with poor credit.

"The fact that fewer of those mortgages are being written is behind, in large part, the declining number of sales of homes," Chen said.

Though prices barely budged from a year earlier in metropolitan Baltimore, the number of home sales has been sliding by double digits each month since April.

The number of homes sold in Baltimore and the five surrounding counties fell 12.36 percent to 2,921 in July, compared with 3,333 homes in July 2006, said MRIS, the multiple-listing service.

With listings at a record 19,985, homes took an average of 80 days to sell, compared with an average of 55 days in July 2006 when inventory was 16,749, the statistics showed.

Some price ranges are faring better than others, real estate agents said. High-end suburban houses - $3 million and up - are selling well, sometimes even within a month, said Marc Witman, a partner at Yerman Witman Gaines & Garceau Realty.

But Baltimore's downtown housing market has an abundance of homes in the $300,000 to $500,000 price range.

"There is such a supply of housing in that price range, they all start to run together," Witman said. "Buyers are becoming more deliberate and are taking their time to select the properties they want to view because there are just so many, and you don't have time to go through them all."

To compete, sellers are having to rethink asking prices and stay on top of repairs and maintenance, real estate agents said.

"Some houses have been on the market for so long that people have lost interest in keeping them up," said Tina Marine, an agent with Coldwell Banker in Annapolis. "They're grungy. The beds get stopped being made. ... People just give up."

David Schreiber and Stacey Wooden are not giving up on selling their renovated, five-bedroom, century-old house in Mount Washington. The family plans to relocate to the Chapel Hill-Durham-Raleigh, N.C., triangle for his job, which has an office in Raleigh.

They have cut their initial price of $769,000, set in April, twice to its current $699,999. The couple had hoped to move over the summer to enroll their two sons in school in North Carolina by fall. But despite several open houses, they have had just one offer.

"We're trying to be pragmatic about things," Schreiber said. "There don't seem to be a lot of variables we have control over in the housing market." (baltimoresun.com)

Reversal of fortune

As European banks scrambled last week to curtail the widening repercussions of the U.S. subprime mortgage mess and deal with a threatened liquidity crunch, discussion turned to whether the Federal Reserve Board would bail out investors caught up in the crisis. The boomerang effect of Americans' reliance on subprime mortgages can't be underestimated, but efforts to manage the fallout should not lose sight of those in danger of losing their homes.

Until last week, the subprime crisis was marked by a cascade of failing lenders, delinquent loans and foreclosures. And then a French bank stopped withdrawals from three investment funds ensnared by the subprime crisis. That triggered Europe's central bank and the Federal Reserve to pump billions into the banking systems to keep credit available as U.S. stocks plummeted.

Whether the actions by the central banks quell concerns or exacerbate the situation will become clear soon enough.

But even if the liquidity crunch eases and the financial markets correct themselves, the collapse of the subprime market will continue to be felt across the country as jobs are lost, loans are tougher to get and homeowners struggle to keep their houses. Experts predict that autumn will bring another wave of delinquencies and foreclosures as the next level of subprime mortgages resets. The effort, at least locally, must remain on attempts to shore up the housing market.

In Maryland alone last week, American Home Mortgage Investment Corp. laid off hundreds of employees in the state while seeking bankruptcy protection; Fieldstone Investment Corp. of Columbia, a subprime lender, quit taking loan applications; and state Licensing Secretary Thomas E. Perez announced the first prosecution of a "foreclosure rescue scam," evidence that criminals are exploiting homeowners' woes.

To keep homeownership available for low-income buyers, regulators must ensure that lending practices are reasonable and realistic. New guidelines issued by the Federal Reserve say loans should be made based on a borrower's ability to pay the entire cost of the loan, not a lower-priced introductory rate - but they are only guidelines.

The increasing rate of home foreclosures is leaving cities such as Baltimore, Cleveland and Riverside, Calif., with a growing vacancy problem. Urban Institute scholar Edward M. Gramlich offers this remedy: State and local governments should invest in the newly vacated homes to address a shortage of rental and affordable housing. That's one way to reap some benefit from a housing bubble gone bust. (baltimoresun.com)

Home prices up, but sales slump may linger

The real estate slump in Baltimore County could drag through 2008 and pull more house prices down with it, local market-watchers warn.

The number of houses sold across the county this June fell 17 percent below sales in June 2006, according to statistics released by Metropolitan Regional Information Systems, a Rockville firm that tracks real estate sales.

The total dollar value of homes sold dropped 14 percent below June 2006 sales while the time it took to sell a house jumped 71 percent from 42 days to 72 days, the firm reported.

The average price of houses sold in Baltimore County, however, increased 3.5 percent to $326,744.

But county real estate agents warn buyers not to hang their hopes on that thin, silver lining. Around the county, some house prices have already dropped.

Prices in northwest Baltimore County have been flat since last summer and now "prices definitely are coming down, but they're not plunging," said Nnaemeka Chima, broker with the Pikesville-based real estate company Chima Group. The average time to sell a house in the northwestern part of the county, he added, now tops three months.

Marc Witman, a former president of the Greater Baltimore Board of Realtors and a principle with Yerman Witman Gaines & Garceau Realty in Baltimore, said he sees particular weakness in Pikesville and Owings Mills, where a large inventory of houses is on the market and many of those houses are similar or nearly identical.

It's a dilemma with which Owings Mills homeowner Jonathan Redley is all too familiar.

When he put his Pleasant Walk town house in Owings Mills on the market April 1, Redley knew not to anticipate a quick sale. But he wasn't expecting to go four full months without a single offer.

"The house shows beautifully. We get great compliments after every showing and we have two to three showings every week," he said.

Redley and his wife have cut their asking price from $265,000 to $260,000, sweetened the pot with a home warranty and are now considering offering to cover some of the buyer's closing costs. But there are six other nearly identical town houses up for sale in Pleasant Walk and dozens more town houses on the market just in Owings Mills.

"So buyers can afford to be very choosy," Redley said.

Sometimes a buyer's choice, he said, is determined by such fine points as which house has the nicer bathtub.

Across the county, more than 4,200 homes were up for sale at the end of June.

Several factors have created a tougher market for house sellers. Double-digit price hikes in recent years placed many houses outside the average buyer's price range. Meanwhile, this year's wave of foreclosures has prompted some lending institutions to stop offering subprime mortgages and other unconventional loans that had enabled moderate-income buyers to purchase a house.

Those factors could force more sellers to trim their asking price, Chima and Witman said.

"This is economics 101. Sellers for the most part have not yet gotten the idea that they need to be more price-sensitive because buyers are very much more price-sensitive and value-oriented than they have been in the last few years," Witman said.

Many sellers are having difficulty realizing they can't follow a recent practice of pricing their house several thousand dollars above the most recent sale in the neighborhood, Chima said.

"It can be very humbling when you realize the boom is over and you've missed it," he said.

Chima says the region's current real estate market is a normal, stable market. Unique and top-quality houses are still selling quickly for high prices. Chima added, however, that he doesn't expect to see prices rise again until the summer of 2009.

But Redley said there is an upside to the current market.

When Redley and his wife bought their Pleasant Walk town house in the hot market of 2005, they had to jump at the opportunity and offer above asking price to beat out competing bidders.

Now the couple, who are expecting their first baby, are shopping for a single-family home. They've found three or four Owings Mills houses they like, and those properties aren't selling either. So when they're ready to make an offer, Redley said, he expects he'll be able to go back to the same homes and have the luxury of negotiating a good price. (owingsmillstimes.com)

Slowdown Offers a Chance to Get Real About Home Sizes

Will the deflating housing market motivate U.S. home buyers to deflate their housing aspirations, to get real not only about what they can afford but also about how much space they need?

Maybe buyers will realize that good design and quality construction ultimately will prove more worthwhile than square footage.

For years, the building industry has produced bigger and bigger homes. Consumer expectations, easy credit and greater profit potential have resulted in new houses with more rooms, larger garages, increased volume and, of course, higher price tags.

Consumers, after all, seek to consume. Why settle for three bedrooms, two baths and a one-car garage? Why not opt for a kitchen big enough to entertain several guests and roast two turkeys at once? Why wouldn't someone want a house with a separate room for every function? How can anyone live without a dedicated audio-video entertainment space, multiple walk-in closets and a master bathroom larger than the rarely used dining room?

Today's housing-market paradox is that while houses have been expanding, households have been shrinking. In suburban houses built during recent decades, fewer people occupy more space.

This trend's lack of sustainability seems to finally be apparent.

Some homes also lack quality and durability. Production houses with more than ample square footage are sometimes cheaply built, have awkward floor plans, suffer from overly complex three-dimensional geometry, and boast too many materials and motifs. How many overlapping gables, neoclassical cornices, false dormers and useless shutters does a house need?

Such homes are not dysfunctional or unsafe. But the construction products may be the least costly; may feel and look inexpensive; and may require maintenance, repair or replacement more frequently.

There are lots of opportunities to compromise quality in designing and building a house. Windows and doors are favorite cost-saving targets. Interior finishes and accessories -- decorative trim and hardware, cabinets, floors, lights -- are also fruitful targets.

Among the most important components of any building, windows provide daylight and views to the outside, keep out the weather, and resist heat gain and loss. Yet the quality, cost and performance range of windows is vast.

For example, windows may be double-glazed but lack energy-efficient, low-emissivity glass and an insulating cavity filled with inert gas. The window frame and sash may be thin vinyl that is easily deformed, rather than aluminum or aluminum-clad wood. The movable sash may not move very smoothly.

If interior doors are not solid-core with robust hardware and a well-aligned frame, they can feel flimsy, shut or latch poorly, and do little to stop noise or fire.

Fortunately, the structural framing, water and waste piping, and electrical systems of new homes usually perform reasonably well, thanks to stringent building codes. Sheet-metal ductwork and mechanical equipment to heat and cool newly built homes also may be fairly reliable, assuming they have been properly engineered and installed.

Today, with dramatic increases in mortgage foreclosures, tightening loan standards, and ever-rising costs of land and construction, many home buyers and home builders will have to alter their behavior.

Attitudes about homes need to shift away from quantity and toward quality. Downsizing should be the new upscaling.

Buyers should demand well-built and long-lasting but modestly sized houses -- 2,000, 2,500 or 3,000 square feet -- instead of ostentatious but cheaply built 5,000- or 6,000-square-foot houses.

Smaller homes will be more affordable, more durable and, not incidentally, a lot easier to keep clean. With good design, they also will be more attractive. (Washington Post)

Housing official aims to enforce rehab rules

Baltimore's housing department is stepping up enforcement of a program used to sell city-owned property to ensure that buyers who purchase homes from the city follow through on promised renovations, the city's housing commissioner told a City Council committee on Aug 1st.

City Housing Commissioner Paul T. Graziano told the City Council's Taxation and Finance Committee that the city is using housing inspectors to check up on properties sold through the city's SCOPE program to make sure the properties are being renovated within 18 months, instead of sitting vacant.

"We're tracking it more closely with our inspectors to make sure the work is actually being done," Graziano said.


SCOPE, which stands for Selling City Owned Properties Efficiently, has come under scrutiny in recent months. Officials said 186 properties have been sold under SCOPE, compared with thousands of derelict properties in Baltimore that are owned by the city.

The city has the ability to take back properties where development has not taken place, but has not yet done so in any instance, Graziano said. (Baltimore Sun)

Overcrowding in Frederick: Experts look into causes for illegal rooming houses

Experts agree a combination of economic, social, legal and cultural factors contributes to overcrowded housing in Frederick. That may be part of the reason the city's code enforcement office has experienced an increase in complaints about overcrowded dwellings.

Last week, city code enforcers condemned 5712 Butterfly Lane. The inspectors also served six cease-and-desist orders on properties scattered around the city that have been illegally converted from single-family dwellings into rooming houses.

Peter Zamora works as the regional counsel in Washington for the Mexican American Legal Defense and Education Fund. The organization works to advocate for and protect the rights of the more than 45 million Hispanics in the U.S.

Zamora believes the lack of immigration reform at the federal level has led some local governments to use regulations to target immigrants.

He points to a recent measure in Prince William County, Va., that denies undocumented immigrants access to community services, such as health care and education. It authorizes county workers to verify the immigration status of anyone on whom a reasonable suspicion exists.

"Certainly, a local community has the ability to put in place health and safety regulations — if it's addressing a real concern, it can be legitimate," Zamora said. "But often we have seen something that has been framed as health- and safety-related that has another purpose."

Is immigration the issue?

Mike Blank, the city's code enforcement manager, said last week's inspections and orders have nothing to do with immigration — the properties were either illegally converted or endangered residents' safety.

"Our office could care less if there are legal or illegal immigrants living in these properties — that's not our concern," he said. "Even if we were looking for illegals, it wouldn't have mattered at Butterfly Lane — the owner and people living there are legal residents."

Inspectors found nine people, including four children, living in the two-bedroom residence which had been converted into an illegal rooming house.

At one time, more than a dozen people lived there, a resident said after the inspection. Occupants used eight makeshift bedrooms, a crude basement kitchen and a backyard shed converted into a living space.

Blank said the house was targeted because it received the most complaints.

While the investigation spanned about a year, last month Mayor Jeff Holtzinger authorized $30,000 for overtime needed to conclude the investigation and increase inspections on other properties.

"There is always a cost to everything, but that's not a factor here," Blank said. "Our main focus is to make sure everyone has a safe place to live in and to protect the quality of life in our community."


Causes of overcrowding

A high cost of living and rising property values top the list of reasons experts gave to explain why some people are forced to live in overcrowded conditions.

Mike Spurrier, director of the Frederick Community Action Agency, said costs rise the closer residents live to Washington. The agency provides food, shelter, medical care, housing and other forms of assistance to low-income or homeless people.

Residents in Montgomery County, between Washington, D.C., and Frederick County, pay an average of 33 percent more than the national average for living expenses, according to the Maryland Department of Business and Economic Development. It costs residents about 14 percent more than average to live in Frederick County. Washington County residents pay about average, while those in Allegany County pay about 20 percent less than average.

"Definitely, an issue of the overcrowding sits in the cost of housing — it's skyrocketing in Frederick," Spurrier said. "People tend to double up because they can't afford to live on their own."

Not having the proper documents can make it impossible for immigrants to find a place to rent, Spurrier said. That often leads to substandard or overcrowded housing, regardless of their legal status.

"You could be a legal immigrant from Russia, but have difficulty establishing a credit history," he said. "Many landlords are looking for credit reports, but immigrants don't have access to that."

Language barriers and differences in culture make things worse, he said. Even native English-speakers don't understand jargon on leases or other legal documents. Many immigrants don't have the money to hire an interpreter.

In other countries, it's common for several generations to live together in a single house.

"It's human nature for people to want to be around those they feel comfortable with," Spurrier said. "If you go to any major metro area, you'll see communities who are Irish or Cuban or Russian living in neighborhoods where they feel culturally connected to each other."


Not enough help

Jenny Short, director of Housing and Community Development for Frederick County, said the closing of public housing projects and the lack of affordable residences also contribute to overcrowding.

For years, the county has offered housing vouchers and federal rental subsidies to families who earn less than 50 percent of the median income, which was $69,005 in 2004.

More residents have applied than the county can help. Waiting lists are closed because of scarce money, Short said. That keeps the program manageable and prevents false hope.

Eileen Barnhard, the city's housing rehabilitation financial specialist, said a sluggish economy, rising cost of living and the high price of real estate also contribute to overcrowded housing. An increase in adjustable rate mortgage foreclosures made things worse.

"When you have an adjustable rate, that rate sometimes goes up every six months," she said. "People have become very marginalized using upwards of 45 percent of their income for these deals."

The rule of thumb used to be to spend about one-third of income on housing expenses, but most people spend much more, she said. The cost of living is not proportionate to people's incomes.

"It's not just the cost to buy a house that's rising, it's also the cost to live in that house — the cost of gas has doubled and tripled, electricity is rising, food prices have gone up," Barnhard said. "People are putting themselves in debt and living paycheck to paycheck trying to survive."


Housing workers

A booming job market and gentrification concern James Upchurch, director of Interfaith Housing Alliance. The alliance is the largest nonprofit affordable housing association in Frederick County.

As more jobs come to Frederick, the professionals they draw displace those in mid- to low-income households, he said. That's because houses can't be built fast enough to meet the demand.

As more high-earning residents come to Frederick, the need for service workers also rises, he said. When teachers, shopkeepers and first responders can't find a place to live, they either commute or double up.

"There is a real disconnect between the jobs that are coming here, like to Fort Detrick, and the growing needs of the community," Upchurch said. "People with lower-paying jobs are taking advantage of the jobs we want them to do, but when you don't create affordable housing, these people don't have a lot of options here in town."

Richard Yeron, director of Centro de Familia, provides social services to immigrants. He compared the living arrangements of many immigrants to those of college students -- they rent a house, divide up the living spaces and split the rent.

He described two clients, both engineers at Bechtel Corporation, who share the cost of a two-bedroom apartment.

"They can't afford to have their own housing," Yeron said. "For two Ph.D. engineers educated in this country to go through that, you can imagine what it must be like for people who don't have an education." (fredericknewspost.com)

Program to stave off foreclosures

Homeowners fearful of losing their homes because of looming defaults and foreclosures could get help through a new state initiative.

Called Homeowners Preserving Equity, the HOPE program offers a commitment of $100 million in private capital to help about 500 homeowners to refinance and switch adjustable-rate mortgages to fixed-rate mortgages.

The state also plans to use $10 million from the state's mortgage insurance program as an incentive to encourage lenders to provide another $200 million to refinance another 1,000 homeowners.

The goal is to prevent an expected wave of foreclosures due to the recent proliferation of "exotic" loans which include adjustable rate, balloon payment and negative amortization loans.

"The HOPE initiative is an innovative package of foreclosure prevention measures, combining refinancing, mortgage insurance, incentives and homeownership counseling to make sure Maryland families can preserve the equity they have built up in their homes," said Ray Skinner, secretary of the state Department of Housing and Community Development, in a statement after a June 13 press conference in Dundalk.

"It is a proactive approach to address rising foreclosure in Maryland due to sub-prime loans before it becomes a crisis," he said. "We're working to protect Marylanders' greatest asset -- their homes."

The state Department of Housing and Community Development has approved more than 40 lenders to participate in the program, including several with branches or headquarters in Baltimore County.

Included are American Home Mortgage Corp., BB&T, Bradford Bank, Capital Mortgage Finance Corp., Carrollton Bank, Chesapeake Bank of Maryland, Chevy Chase Bank, Citizens Trust Financial Group, Equitable Trust Mortgage Corp., First Equity Mortgage, First Home Mortgage, First Preference Mortgage Corp., M&T Bank and Metrocities Mortgage.

Refinancing is not the only feature of the program.

The Maryland Affordable Housing Trust, administered by the Department of Housing and Community Development, is offering $1 million in competitive grants to nonprofits that provide counseling services to homebuyers.

The one-year awards cannot exceed $100,000 per organization.

In addition, Gov. Martin O'Malley has created a task force to analyze homeownership data and also possibly recommend changes in foreclosure procedures. The task force will report to O'Malley in October before the 2008 General Assembly session begins in January.

The secretaries of the Department of Housing and Community Development and the Department of Labor, Licensing and Regulation will head the task force, which will also include representatives from the mortgage industry, state agencies and housing advocates.

As of June 21, officials had not picked the members.

For more information about the HOPE program, call 1-877-462-7555 or go to www.dhcd.state.md.us.

For complaints about lending practices, call the Department of Labor, Licensing and Regulation at 888-784-0136. (Arbutus Times)

Md. bubble economy feels chill wind from nation's credit crisis

There are still reasons to believe the housing heartache won't badly hurt the rest of the economy, but not as many as a few days ago.

Countrywide Financial Corp., which handles nearly a fifth of all U.S. mortgages, reported soaring delinquencies, falling profits and increased default risk last week. Baltimore's First Mariner Bancorp disclosed similar problems.


Sales of existing homes fell for the fourth month in a row, and more than expected. New-home sales were even worse. Homebuilders also reported worse-than-predicted results as sales plunged and assets depreciated.

And the stock market, one proxy for the larger economy, had its worst week in nearly five years.

"To this point we have not seen significant spillovers from the housing sector into other parts of the economy," Federal Reserve Chairman Ben S. Bernanke told Congress nine days ago.

Wonder what he thinks now?

Nobody expected the home and mortgage businesses to thrive anytime soon. But nobody expected Countrywide chief executive Angelo R. Mozilo to start comparing the current environment with that of the Great Depression. Nobody figured on a spike in soured loans to homeowners with good credit ratings.

Nobody expected the collapse of two New York hedge funds investing in subprime mortgages to kick up dust in Baltimore. Nobody expected a bunch of First Mariner's mortgages in Northern Virginia to go bad less than three months after they were issued.

"I've never had anything like this happen to me," First Mariner Chief Executive Officer Edwin F. Hale Sr. said last week.

This from a guy who has been wheeling and dealing for decades and became chairman of the Bank of Baltimore after it had to foreclose on 13 hotel projects in the early 1990s. Hale took control of the bank through a proxy fight and sold it before starting First Mariner.

Until very recently, economic optimists had comforted themselves with the notion that housing problems were "contained."

The biggest were confined to Florida, California and maybe a few Midwestern states, they said. Only the worst combinations of upward-adjusting interest rates and poorly qualified borrowers would cause defaults. Homebuilder stocks were still a good long-term bet.

Unemployment was still low, implying plenty of personal income to pay mortgages. Things would pick up in the spring home-buying season, people figured.

But there was no season, it is now apparent. At least not enough of one to prevent a downward spiral in states such as Nevada, Arizona, Illinois, Ohio, Indiana, Maryland and Virginia.

The salve of federal money that has protected the Baltimore-Washington region from economic pain is losing its effectiveness. Half of First Mariner's problem loans were in Northern Virginia, home of a defense-spending spree since 2001. The rest were in several other states.

First Mariner had sold the loans to New York investment house Bear Stearns Cos., but it was required to repurchase them when borrowers began missing payments. This month Bear Stearns disclosed that two of its subprime mortgage investment pools called hedge funds were all but worthless.

Hale thinks some of the mortgages may have been issued to "flippers" seeking a quick buck, violating contract terms requiring the money to be applied to a primary residence.

Even so, the delinquencies don't speak well of the Northern Virginia economy or, by implication, Maryland's, which has been operating in the same federal bubble.

Now even mortgages issued to well-qualified borrowers are at risk. The Mortgage Bankers Association had already reported an uptick in soured "prime" loans for the first quarter. Foreclosure rates in Indiana, Ohio and Michigan exceeded those in Texas during the oil bust in the 1980s, the association said.

Last week Countrywide said more borrowers with good credit records were missing payments - and not just on loans whose low "teaser" rates were adjusting upward. Some were delinquent because of unemployment, which suggests an economywide problem. And the crescendo of adjusting loans continues; plenty of three-year adjustables issued in recent years have yet to reset to market rates and ding family finances.

Homebuilder stocks are revisiting lows of last summer, and now trauma has spread across the securities spectrum.

It wasn't just most stocks that sold off last week. Corporate bonds took a header, too, which could presage a credit crunch and slower growth.

All this occurs on an economic foundation that wasn't solid to begin with. National employment growth has slowed from last year, and so has Maryland's.

The metro-Baltimore economy "has taken a sharp hit in the past six months, with job growth coming in well below the national pace thus far this year," Economy.com's Rakesh Shankar wrote recently. "This is a marked deviation from the previous five years."

It's not hopeless. The low dollar will boost U.S. exports. Interest rates should fall (it's time to start now, Chairman Bernanke), which will help. Maryland is getting tens of thousands of defense-related jobs, which will help even more. We won't see a recession.

But we will see even slower growth, and the housing industry will be the chief ball and chain. (baltimoresun.com)

Biotech park upsets residents. East Baltimore plan brings worry about affordable homes

A plan to build a sprawling $800 million biotechnology park adjacent to Johns Hopkins Hospital has some East Baltimore residents worried that they will not be able to afford to buy new homes in the area despite the roughly $150,000 they will receive for homes that will be demolished to make way for offices, shops and residences.

East Baltimore Development Inc., a nonprofit organization created by the city to manage the project, has promised to come up with money from an equity fund and specially tailored mortgage loans to help residents buy new houses, which are expected to have a starting price of $250,000.

But some homeowners say the price of the new houses will be so steep that they will not be able to purchase homes in the upscale neighborhood without going into debt.

"We want to make sure that we can get a house for a house," said Donald Gresham, a 20-year homeowner and chairman of the Save Middle East Action Committee. "No one wants to take on any more debt."

The disgruntled property owners are rallying behind a "House for a House" slogan and will meet today at the EBDI offices, 1809 Ashland Ave., to discuss alternate plans with development officials.

Gresham and other residents wrote a memorandum to East Baltimore Development Inc. officials this month in which they clearly stated their opposition to the equity/mortgage plan.

"[This plan] can lead to a plantation where people are not the true masters of their own homes," the July 3 memo said. "And frankly, if asked, our recommendation [to residents and others] would be: 'Look into it. But you will want to be very, very careful about it.' Let the buyer beware."

The equity fund has been "seeded" with $6 million in city and private funds, but it is unclear who would manage it. When residents sell their homes, the fund would receive the value of the original loan plus a percentage of the increase in the property's value. EBDI officials say the fund is a cutting-edge financial tool that could be used to help future families become homeowners in the neighborhood.

They argue that old housing investment models, including publicly subsidized construction and tax incentives to developers to build low-income housing, will not work as effectively.

"This is something that is critically important to ensure that what is delivered here works not just for a few years but for the course of decades as well," said Jack Shannon, president and chief executive officer of EBDI.

"We don't want to undercut a developing real estate market," Shannon said.

EBDI officials say they are responding to residents' concerns. They are talking with developers about building lower-priced homes sooner, as well as building more of them. Shannon said that he and his staff are also looking into ways to renovate existing rowhouses within the revitalization area, which could provide houses in a price range that would be affordable to residents, some of whom make less than $12,000 a year.

Shannon said some of the existing homeowners could move into senior apartments or to houses in other parts of the city. As part of the project, some residents are receiving additional training and education so that they can get jobs at the new biotech park and perhaps increase their household income.

Residents who are leasing houses or apartments also are receiving education on the benefits of homeownership, as well as other financial advice.

"If we are going to deliver this project, we are going to have to take new approaches," Shannon said, referring to the sweeping project, which calls for the creation of thousands of jobs and the transformation of one of the most decayed and crime-ridden areas of the city.

The 88-acre biotech project is about to enter its second phase. In the initial phase, covering 30 acres north of the Johns Hopkins medical campus, 916 properties, 278 of which were occupied, were demolished and 396 families had to be relocated. Shannon said that a senior apartment complex is near completion and that 27 of the 74 units have been leased to East Baltimore residents. Residents, whether homeowners or renters, have dibs on housing in the revitalization area.

Shannon said that about the same number of properties will be demolished or renovated as part of phase two, which covers more than 50 acres. In the end, five life sciences buildings will be constructed, as well as a mix of housing, including "work force" apartment lofts for social workers, teachers and police officers. There will also be housing for biotech professionals that will be priced at market rate, with some units going for $300,000 or more.

"There is a lot of resistance to the equity fund owning a piece of people's houses," said Nathan Sooy, executive director of the Save Middle East Action Committee. "People don't like the idea. There is a visceral resistance to someone else owning part of the house."

Sooy said that many residents own their homes outright because deeds were passed down by parents or other relatives. Such residents are not willing to take on new debt to purchase new houses. Sooy said residents also don't like the mortgage deal proposed by EBDI. Under the plan, mortgage payments would be tied to a homeowner's monthly income and would represent 30 percent of the total sum.

"It seems like a lot of money to people," Sooy said. "And as we were discussing it with residents, we really couldn't find anyone who really wanted to do this."

Sooy and others say that EBDI is quietly trying to move low-income residents out to make way for future employees of Johns Hopkins, which will use about one-third of the office space in the new biotech park.

"Remember, the whole thing here is to serve the business interest of Johns Hopkins University," said Sooy. "And a lot of the vision has to do with having places for people who work in the biotech industry to live."

Shannon denied that plan calls for displacing area residents to make way for workers at the biotech park. A spokesman for the Johns Hopkins University declined to answer questions about the project.

"There is a level of mistrust and in some cases cynicism, in large part because there have been lots of past projects and promises and the results have not mirrored the commitments that were made," said Shannon, who acknowledged that EBDI had been slow in informing residents about more affordable housing options. He promised to be more communicative.

Shannon said residents and development officials had sparred before, but the two sides had struck a more cooperative chord recently. "We are past opposition to the entire plan," said Shannon, "but we are still trying to figure out the best way to move forward and that is not easy." (baltimoresun.com)

Officials decry housing-bias suit: Queen Anne's said to block affordable units

Political leaders of Queen Anne's County said yesterday they are outraged by allegations in a federal lawsuit that accuses them of blocking affordable housing and discriminating against minorities, calling the legal action "cynical and inflammatory."

In a prepared statement, the five county commissioners said they are dealing with limited water and sewer service and that they do support "moderately priced" homes. In March, they noted, they tried to hasten completion of a low- and moderate-income development on Kent Island.

Dr. Eric S. Wargotz, commission president, said in the statement that accusations that the county is "insensitive to the needs of African Americans is insulting and wrong."

On Friday, lawyers for developer John C. Stamato, Enterprise Homes Inc. and another builder, and two black people who said they cannot afford a home in the county, sued the commissioners in U.S. District Court in Baltimore. They claim the county's delays on the 218-home Sayer's Choice project in Grasonville amount to a "pattern of discrimination against minorities" that violates federal housing rules.

Specifically, the plaintiffs question the county's refusal in May to move up consideration of allowing sewer and water access.

"This is just a ploy to get water and sewer," said Courtney M. Billups, a lawyer and the only black member of the commission. "Maybe I would like a condo on the Baltimore waterfront, but I can't afford it. I don't have standing to sue Baltimore City."

Anti-growth sentiment is rampant in Queen Anne's County, where pressure to develop is high and voters have tossed out six commission members over the issue since 2002.

Commissioner Gene M. Ransom III, who was accused in the lawsuit of expressing concern about affordable housing being built near his Grasonville home, denied all the allegations yesterday.

A lawyer for the county's planning commission said in prepared remarks that Enterprise Homes Inc., which supports affordable housing across the country, has not been part of Stamato's application.

Stamato has sought to build 168 single-family homes and townhouses on 116 acres in Grasonville, with 10 percent, or 17 units for moderately priced housing. He donated an additional 28 acres to Enterprise Homes Inc. for 50 affordably priced units. (baltimoresun.com)