Maryland needs to change its mortgage laws, improve outreach to vulnerable borrowers and create emergency funds for families in mortgage trouble if it is going to stem a rising foreclosure rate, a task force said yesterday.
The report by the Homeownership Preservation Task Force comes as Maryland's foreclosure rate shot up 370 percent from June 2006 to June 2007, moving the state from 40th in the nation to 15th for foreclosures.
"The foreclosure spike is a national phenomenon, and Maryland has not escaped the challenges," said Tom Perez, secretary of the Department of Labor, Licensing and Regulation, who co-chaired the task force.
RealtyTrac, a national foreclosure tracking company, estimates that there was one foreclosure for every 806 households in Maryland over the past year. While the state's rate grew 370 percent, the national rate was up 87 percent, RealtyTrac reported.
"Today, we're 15th," Perez said. "Our goal is to be 50th. We're moving in the wrong direction."
In June, Gov. Martin O'Malley established the task force and charged it with finding ways to curb the growing foreclosure problem. The task force report to the governor yesterday suggested stronger underwriting and lending standards, as well as more oversight for the mortgage industry.
It also called for better education to help homeowners avoid predatory lenders, and more access to better financial products for people purchasing or refinancing homes.
Perez said the immediate issue is homeowners on the verge of or facing foreclosure. One task force suggestion is the creation of a fund to provide case-by-case interventions to prevent foreclosure, allowing more stable monthly payments or time for a property sale to troubled owners.
Some of the recommendations to the governor will require changes in Maryland law "to rein in bad players and practices," according to the report. The report also recommends a regulatory change to increase the time between default and foreclosure to 90 days from 15 days.
"What you're not seeing in there perhaps are some specifics in terms of what it might cost to fund some of the programs" recommended in the report, said Jacqueline Lampell, spokeswoman for the Department of Housing and Community Development. "That's because we don't really even know what the full impact of foreclosure will be."
Foreclosures disproportionately result from subprime loans, those offered to borrowers who have less than optimal credit and have difficulty getting a traditional loan. Such loans tend to have higher interest rates and options such as adjustable and teaser rates, according to the report.
A Maryland Bankers Association survey showed that adjustable-rate mortgages in the state grew from 1.6 percent of the total mortgages in 2000 to 11.7 percent in 2007. (by Capital News Service)
Tuesday, December 18, 2007
Thursday, December 13, 2007
Ruling helps poor renters
Counties' order that landlords accept vouchers is upheld
Landlords in Howard and Montgomery counties cannot turn away low-income renters who pay for their housing with federal vouchers, Maryland's highest court ruled yesterday.
The unanimous ruling upholds fair-housing laws in those counties and, housing advocates say, provides momentum for a drive to pass a statewide law requiring landlords to accept rental vouchers. Such a law, advocates say, would make it easier for poor people to live in affluent communities with better jobs and better schools.
"It's appalling that we do not have this as a state law and that people can be denied housing" solely because they are paying with a voucher, said Montgomery County Executive Isiah Leggett. He said landlords who don't accept vouchers are "impacting quite severely the level of affordable housing that may be available to people."
The Housing Choice voucher program -- formerly called Section 8 -- requires recipients to pay a portion of their income, usually about a third, toward rent and covers the balance with money from the U.S. Department of Housing and Urban Development. The federal law does not require landlords to accept the vouchers.
But a dozen states, as well as Howard and Montgomery counties in Maryland, have passed laws requiring participation. When a garden apartment complex in Wheaton refused to accept a woman's voucher, Montgomery County's Human Rights Commission fined the owner $15,000 and awarded $5,000 in compensatory damages to the would-be tenant.
The landlord, Glenmont Hills Associates, appealed the decision. A Montgomery Circuit Court judge found for the landlord last year, saying its refusal to participate was based on a legitimate, nondiscriminatory desire "to avoid the administrative hassle of the program."
The Maryland Court of Appeals overturned that decision yesterday. An attorney for the landlord, Jay Holland, said he was "extremely disappointed" and that he and his client are considering petitioning the U.S. Supreme Court to hear the case. At issue is whether federal law, which makes the program voluntary, can be trumped by a state or local law requiring participation.
In its decision, the Court of Appeals quoted from the 1995 HUD regulations creating the program: "State and local governments can of course impose additional requirements."
But Holland said the practical effect of the ruling might be that landlords will set their rents so high that voucher recipients cannot afford them.
Glenmont participates in Montgomery County's rental assistance program and has its own program to provide apartments at discounted rates to low-income residents. But the apartment complex owners felt the additional rules that come with the federal vouchers were burdensome, Holland said.
Affordable-housing advocates say that reasoning is often a red herring.
"Landlords say they don't want the administrative burden, but in many cases they don't want poor people in the buildings, and sometimes it's a surrogate for racial discrimination as well," said Bob Bruskin, senior counsel at the Washington Lawyers Committee for Civil Rights and Urban Affairs, which filed a friend-of-the-court brief supporting Montgomery County in the lawsuit.
Others who supported the county said the requirement was critical to integration efforts, both in terms of race and socioeconomics. They said that to qualify for the vouchers, families must pass credit and criminal background checks.
"I don't think America really wants to be so snotty and segregated as to say, 'I don't want somebody who's working but doesn't make as much as I do to live in my neighborhood or have their children go to school with my children,'" said Shanna Smith, president and CEO of the National Fair Housing Alliance.
Montgomery County has about 5,400 rental vouchers in use, compared with 1,100 in Howard County and more than 11,000 in Baltimore City, which does not have the "source of income" law requiring participation. The law is critical in Montgomery County, officials said, because of the high cost of housing there.
"In this county in particular, where for years you've had a very hot housing market, it's important to make sure that [more] than high-income people have access to housing," said Montgomery County Attorney Leon Rodriguez.
He said the Court of Appeals ruling should put to rest any concerns that other jurisdictions or state lawmakers might have about the legality of local laws pre-empting the federal law. A statewide fair-housing law would make it easier for low-income people to find housing, advocates said.
"If such a law were mandated statewide, that there couldn't be 'source of income' discrimination, it would have a significant impact upon the ability of people with vouchers to find housing and would reduce the specter of homelessness" for the poor, said Gregory Countess, an attorney with the Legal Aid Bureau of Maryland, which focuses on housing issues.
Baltimore City's housing commissioner, Paul A. Graziano, has said that he supports a statewide fair-housing law. (By Stephen Kiehl | Baltimore Sun)
Landlords in Howard and Montgomery counties cannot turn away low-income renters who pay for their housing with federal vouchers, Maryland's highest court ruled yesterday.
The unanimous ruling upholds fair-housing laws in those counties and, housing advocates say, provides momentum for a drive to pass a statewide law requiring landlords to accept rental vouchers. Such a law, advocates say, would make it easier for poor people to live in affluent communities with better jobs and better schools.
"It's appalling that we do not have this as a state law and that people can be denied housing" solely because they are paying with a voucher, said Montgomery County Executive Isiah Leggett. He said landlords who don't accept vouchers are "impacting quite severely the level of affordable housing that may be available to people."
The Housing Choice voucher program -- formerly called Section 8 -- requires recipients to pay a portion of their income, usually about a third, toward rent and covers the balance with money from the U.S. Department of Housing and Urban Development. The federal law does not require landlords to accept the vouchers.
But a dozen states, as well as Howard and Montgomery counties in Maryland, have passed laws requiring participation. When a garden apartment complex in Wheaton refused to accept a woman's voucher, Montgomery County's Human Rights Commission fined the owner $15,000 and awarded $5,000 in compensatory damages to the would-be tenant.
The landlord, Glenmont Hills Associates, appealed the decision. A Montgomery Circuit Court judge found for the landlord last year, saying its refusal to participate was based on a legitimate, nondiscriminatory desire "to avoid the administrative hassle of the program."
The Maryland Court of Appeals overturned that decision yesterday. An attorney for the landlord, Jay Holland, said he was "extremely disappointed" and that he and his client are considering petitioning the U.S. Supreme Court to hear the case. At issue is whether federal law, which makes the program voluntary, can be trumped by a state or local law requiring participation.
In its decision, the Court of Appeals quoted from the 1995 HUD regulations creating the program: "State and local governments can of course impose additional requirements."
But Holland said the practical effect of the ruling might be that landlords will set their rents so high that voucher recipients cannot afford them.
Glenmont participates in Montgomery County's rental assistance program and has its own program to provide apartments at discounted rates to low-income residents. But the apartment complex owners felt the additional rules that come with the federal vouchers were burdensome, Holland said.
Affordable-housing advocates say that reasoning is often a red herring.
"Landlords say they don't want the administrative burden, but in many cases they don't want poor people in the buildings, and sometimes it's a surrogate for racial discrimination as well," said Bob Bruskin, senior counsel at the Washington Lawyers Committee for Civil Rights and Urban Affairs, which filed a friend-of-the-court brief supporting Montgomery County in the lawsuit.
Others who supported the county said the requirement was critical to integration efforts, both in terms of race and socioeconomics. They said that to qualify for the vouchers, families must pass credit and criminal background checks.
"I don't think America really wants to be so snotty and segregated as to say, 'I don't want somebody who's working but doesn't make as much as I do to live in my neighborhood or have their children go to school with my children,'" said Shanna Smith, president and CEO of the National Fair Housing Alliance.
Montgomery County has about 5,400 rental vouchers in use, compared with 1,100 in Howard County and more than 11,000 in Baltimore City, which does not have the "source of income" law requiring participation. The law is critical in Montgomery County, officials said, because of the high cost of housing there.
"In this county in particular, where for years you've had a very hot housing market, it's important to make sure that [more] than high-income people have access to housing," said Montgomery County Attorney Leon Rodriguez.
He said the Court of Appeals ruling should put to rest any concerns that other jurisdictions or state lawmakers might have about the legality of local laws pre-empting the federal law. A statewide fair-housing law would make it easier for low-income people to find housing, advocates said.
"If such a law were mandated statewide, that there couldn't be 'source of income' discrimination, it would have a significant impact upon the ability of people with vouchers to find housing and would reduce the specter of homelessness" for the poor, said Gregory Countess, an attorney with the Legal Aid Bureau of Maryland, which focuses on housing issues.
Baltimore City's housing commissioner, Paul A. Graziano, has said that he supports a statewide fair-housing law. (By Stephen Kiehl | Baltimore Sun)
Friday, December 7, 2007
Commercial real estate begins to cave
This Bloomberg story is a little breathless, but there can be no doubt now that the credit crunch has spread to commercial property. Will be interesting to see how this affects Baltimore.
The cost of derivatives protecting investors from defaults on the highest-rated bonds backed by properties more than doubled in the past month, according to Markit Group Ltd. Prices suggest traders anticipate defaults rising to the highest level since the Great Depression, according to analysts at RBS Greenwich Capital in Greenwich, Connecticut.
The seven-year rally in offices and retail properties ended in September when prices fell an average of 1.2 percent, according to Moody's Investors Service. More losses are likely because banks are holding $54 billion of commercial mortgages they can't sell, data compiled by New York-based Citigroup Inc. show.
Lenders are struggling to sell loans to investors after losses on debt backed by subprime mortgages to people with poor credit caused financial markets to seize up in July and August. Bonds with AAA ratings secured by properties ranging from the Sears Tower in Chicago to trailer parks in Delaware yield about 203 basis points more than similar maturity Treasuries, up from 92 basis points on Oct. 12, according to Morgan Stanley indexes. (Baltimore Sun)
The cost of derivatives protecting investors from defaults on the highest-rated bonds backed by properties more than doubled in the past month, according to Markit Group Ltd. Prices suggest traders anticipate defaults rising to the highest level since the Great Depression, according to analysts at RBS Greenwich Capital in Greenwich, Connecticut.
The seven-year rally in offices and retail properties ended in September when prices fell an average of 1.2 percent, according to Moody's Investors Service. More losses are likely because banks are holding $54 billion of commercial mortgages they can't sell, data compiled by New York-based Citigroup Inc. show.
Lenders are struggling to sell loans to investors after losses on debt backed by subprime mortgages to people with poor credit caused financial markets to seize up in July and August. Bonds with AAA ratings secured by properties ranging from the Sears Tower in Chicago to trailer parks in Delaware yield about 203 basis points more than similar maturity Treasuries, up from 92 basis points on Oct. 12, according to Morgan Stanley indexes. (Baltimore Sun)
Foreclosure victim seeks relief from Maryland Court of Appeals
Kwaku Atta Poku and his family lost their townhouse to foreclosure after he could not prove he had paid off a mortgage.
A lawyer for Kwaku Atta Poku, the Columbia cab owner from Ghana who lost his house to foreclosure although he had made every mortgage payment, tried yesterday to convince skeptical Maryland Court of Appeals judges that they can grant him a legal way to recoup his financial losses without undermining the state's real estate system.
Attorney Scott C. Borison said his task was to show the judges on the state's highest court that Atta Poku had been placed in a "Kafkaesque" situation through no fault of his own, and that they could open a way for him to pursue a negligence claim.
Under current law, he said, a foreclosure can go through in 15 days, although it could take 30 days to get a ruling to stop it. If the court decides in Atta Poku's favor, it could change the rules governing foreclosures in Maryland.
Kenneth MacFayden, the attorney arguing for Washington Mutual Inc., the mortgage firm that took Atta Poku's townhouse and resold it more than two years ago, suggested such a ruling would reverse a legal foreclosure and affect an owner's ability to sell a property with a foreclosure in its history.
"How will I ever be able to transfer title and get title insurance again?" MacFayden asked the judges.
"What do I do about the fact that the property was sold? What do I do?" Judge Alan M. Wilner asked Borison.
Borison later agreed that, "the sale has occurred. The house is gone. There's nothing to get back."
Borison said he was trying to allow Atta Poku a way to recoup his financial losses - a dim prospect if the foreclosure is judged legal.
"My claim is real simple. Mr. Atta Poku went to these people to refinance. He didn't take any money out of the transaction," Borison said, noting that Washington Mutual or its sister companies held the original mortgage and also did the refinancing.
"They were taking money from one pocket and putting it in another," he said.
No one representing Washington Mutual has accused Atta Poku of causing the foreclosure. Shane Winn, the company's spokesman, has said Washington Mutual never received the settlement check satisfying the first mortgage after the refinancing. Atta Poku could not prove they received it because several key documents, including the settlement check itself, were lost by financial institutions.
Judge Dale R. Cathell noted another difficult aspect of the case.
"You're asking us to do something we haven't done before," he told Borison.
Later Cathell said, "I don't mean to say there's not been a wrong done," he said. "How is it corrected? I just don't know how to do it. I can't for the life of me understand how do you ratify a sale, and not ratify a sale?"
Judge Irma S. Raker asked MacFayden: "How could Mr. Atta Poku have avoided all this once this train started moving?"
MacFayden said Atta Poku could have sought an injunction to stop the foreclosure, and filed lawsuits against the settlement company, its agent, and the bank involved. MacFayden said he suspects the money was embezzled. But Borison said Atta Poku didn't get a lawyer licensed to practice in Maryland until after the foreclosure and the sale - a period of a few weeks.
Atta Poku sat in the court's front row, watching as the opposing lawyers answered questions from the seven red-robed judges.
After the nearly one-hour hearing in Annapolis, he said he had expected to hear more about the human side of his predicament.
"I'm just hoping all these technicalities will be resolved," he said. "If the law keeps all these technicalities - then justice will be stampeded."
After the hearing, J. Preston Turner, a Towson lawyer also representing the mortgage company, approached Atta Poku and offered to discuss the possibility of a settlement. Borison said he's more likely to wait for the high court's decision. (By Larry Carson |Baltimore Sun)
A lawyer for Kwaku Atta Poku, the Columbia cab owner from Ghana who lost his house to foreclosure although he had made every mortgage payment, tried yesterday to convince skeptical Maryland Court of Appeals judges that they can grant him a legal way to recoup his financial losses without undermining the state's real estate system.
Attorney Scott C. Borison said his task was to show the judges on the state's highest court that Atta Poku had been placed in a "Kafkaesque" situation through no fault of his own, and that they could open a way for him to pursue a negligence claim.
Under current law, he said, a foreclosure can go through in 15 days, although it could take 30 days to get a ruling to stop it. If the court decides in Atta Poku's favor, it could change the rules governing foreclosures in Maryland.
Kenneth MacFayden, the attorney arguing for Washington Mutual Inc., the mortgage firm that took Atta Poku's townhouse and resold it more than two years ago, suggested such a ruling would reverse a legal foreclosure and affect an owner's ability to sell a property with a foreclosure in its history.
"How will I ever be able to transfer title and get title insurance again?" MacFayden asked the judges.
"What do I do about the fact that the property was sold? What do I do?" Judge Alan M. Wilner asked Borison.
Borison later agreed that, "the sale has occurred. The house is gone. There's nothing to get back."
Borison said he was trying to allow Atta Poku a way to recoup his financial losses - a dim prospect if the foreclosure is judged legal.
"My claim is real simple. Mr. Atta Poku went to these people to refinance. He didn't take any money out of the transaction," Borison said, noting that Washington Mutual or its sister companies held the original mortgage and also did the refinancing.
"They were taking money from one pocket and putting it in another," he said.
No one representing Washington Mutual has accused Atta Poku of causing the foreclosure. Shane Winn, the company's spokesman, has said Washington Mutual never received the settlement check satisfying the first mortgage after the refinancing. Atta Poku could not prove they received it because several key documents, including the settlement check itself, were lost by financial institutions.
Judge Dale R. Cathell noted another difficult aspect of the case.
"You're asking us to do something we haven't done before," he told Borison.
Later Cathell said, "I don't mean to say there's not been a wrong done," he said. "How is it corrected? I just don't know how to do it. I can't for the life of me understand how do you ratify a sale, and not ratify a sale?"
Judge Irma S. Raker asked MacFayden: "How could Mr. Atta Poku have avoided all this once this train started moving?"
MacFayden said Atta Poku could have sought an injunction to stop the foreclosure, and filed lawsuits against the settlement company, its agent, and the bank involved. MacFayden said he suspects the money was embezzled. But Borison said Atta Poku didn't get a lawyer licensed to practice in Maryland until after the foreclosure and the sale - a period of a few weeks.
Atta Poku sat in the court's front row, watching as the opposing lawyers answered questions from the seven red-robed judges.
After the nearly one-hour hearing in Annapolis, he said he had expected to hear more about the human side of his predicament.
"I'm just hoping all these technicalities will be resolved," he said. "If the law keeps all these technicalities - then justice will be stampeded."
After the hearing, J. Preston Turner, a Towson lawyer also representing the mortgage company, approached Atta Poku and offered to discuss the possibility of a settlement. Borison said he's more likely to wait for the high court's decision. (By Larry Carson |Baltimore Sun)
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