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)