Worst foreclosures just around corner? By JANE MCHUGH Staff Writer
The worst of the foreclosure crisis is yet to come.
Subprime adjustable rate mortgage interest rate resets are expected to peak during 2008, which will likely lead to more defaults and foreclosures, the state Department of Housing and Community Development has predicted.
And national figures released Tuesday by RealtyTrac said the number of American homes heading toward foreclosure more than doubled in the first three months of this year over the last quarter of 2007.
In Bowie in the last quarter of 2007, the most foreclosures took place in the 20720 and 20721 ZIP codes.
The total number of foreclosures for all four Bowie ZIP codes during that period was 351, up substantially from 23 in the last quarter of 2006.
ZIP code 20720, which is located west of the CSX Railroad tracks and north of Route 50 and encompasses the northern part of Old Bowie, had 100 foreclosures in the last quarter of 2007; and 20721, also west of the railroad tracks but south of Route 50, had 108. Those figures compare with two foreclosures in the last quarter of 2006 for 20720 and 10 for 20721.
ZIP code 20715, east of the railroad tracks and north of Route 50, had 58 foreclosures in the last quarter of 2007 compared with nine in the same quarter of 2006. ZIP code 20716, also east of the tracks but south of Route 50, had 85 in the last three months of 2007 compared with two in the same period the year before.
The Glenn Dale ZIP code, 20769, had 20 foreclosures in the last quarter of 2007 compared with one in the same quarter in 2006.
All the numbers come from the department's Office of Research.
There will be a foreclosure workshop Saturday, May 10, at Unity Center of Light, 3501 Moylan Drive, where residents can get free, one-on-one legal advice about their individual situation. Interested people can preregister by calling 301-864-8352, ext. 10 and leave their name, address and telephone number.
Experts say the foreclosure crisis could be alleviated if people started to buy properties again. But the banks are practicing stricter lending and "making it very hard and expensive to get a loan," said Ed Haraway, a Realtor with 22 years experience and a director of the Greater Bowie Chamber of Commerce.
As a result, the value of houses is depreciating. "If anybody bought between late 2005 and (through) 2007, their house is worth less than they paid for it," Haraway said. "Ten years from now, that won't really matter. But to people who have to sell now, their house is worth less and they probably owe more than it's worth."
Not included in the foreclosure statistics, Haraway pointed out, are short sales - discounted loan balances, in which properties are sold for less than the amount owed on a mortgage. Short sales make up one out of five houses on the market today, he said. "The military especially gets hit by this. They come to Bowie in 2006 and buy a house. In 2008, they're transferred out of the area. Now their house, which sold for $400,000 is worth $350,000. The bank forgives the $50,000 (difference). The IRS considers this ($50,000) income and you have to pay tax on it - but Congress has passed legislation where people don't have to do this" because of the foreclosure crisis.
"But after December of this year, the law goes back to the way it originally was, that you have to pay the income tax" on the short sale.
Another experienced Realtor, Boyd Campbell, who serves on Bowie's Economic Development Committee, said a "disproportionate" number of foreclosed properties in Bowie are condominiums. "There's a significant number of foreclosures in the condo world in Maryland, D.C., and northern Virginia," he said.
"I don't see any light at the end of the tunnel until probably the beginning of next year.
"There's not a lot of incentive for buyers to buy. They think, 'Why should I buy a condo for $275,000 when I can buy it for $250,000 60 days from now?' "
The foreclosure crisis shouldn't be blamed largely on subprime lending, Campbell said. "There are a lot of causes - layoffs, unemployment or scaling back on working hours. Lenders consider overtime in your income and if your hours are scaled back, that reduces your take-home pay. That plus the sheer increase in fuel, groceries and utilities has put people in a bind," he said.
