Maryland went from the middle of the pack in terms of foreclosures to one of the top states.
Many homeowners in our region are still struggling, some six years after the housing crisis began. For example, in Maryland, over the past year, the number of foreclosures has shot up, with new filings increasing by more than 250 percent.
Nana Malaya was one of those homeowners facing foreclosure last year. Malaya owns a top-floor condo in the Cheverly area of Prince George's County. As a self-employed artist and arts educator, she had been struggling to make ends meet since the recession began.
"Just as in so many places, the funding got discontinued," she says. "Over the years, unfortunately that's been going on in arts, a lot of programs have been cut. So with that, also went my income."
Then came the 2012 derecho, which struck the mid-Atlantic with 70 mile-per-hour winds. Malaya happened to be out of town the night the storm hit. When she got home, a terrified neighbor described what had happened: the wind tore the roof off, like opening a sardine can.
The wind and rain destroyed nearly everything in Malaya's condo. Insurance would pay to replace many of her things, and to repair the building, but those repairs would take more than a year.
"So it's like, where am I going to go for a year? And then the reality of the fact that I would also have to pay my mortgage, and wherever and however else I was going to sustain myself, got to be a real eye-opener," she says.
Her insurance didn't pay for the whole time she was displaced, and she ended up couch hopping with friends and relatives.
Epidemic of foreclosures in Maryland
Maryland ranks third in the country for foreclosure rates in the most recent data available via realtytrac.com.
She certainly wasn't the only one struggling. In 2013, a second wave of foreclosures hit Maryland. In the third quarter of last year — the most recent for which data has been released — there were more than 11,000 foreclosures across the state. Among all 50 states, Maryland went from 16th most foreclosures, to number three in the nation.
Clarence Snuggs, Maryland's deputy secretary of housing and community development, says 2011 and 2012 were anomalies.
"The numbers were down significantly in 2011 and 2012," he says.
During those years, lenders basically hit pause on processing foreclosures in Maryland. At the end of 2010, the state went from seeing more than 5,000 a month, to fewer than 2,000.
There were a number of factors behind this. After the 2010 robo-signing scandal, banks slowed down and spent the next two years working out a settlement with state attorneys general. Also in 2010, Maryland passed laws making foreclosure a more difficult and time consuming process.
"Back in 2007 it was possible to foreclose on a homeowner in Maryland in as short as 15 days, without a lot of notice," says Snuggs. "So one of the things was to give people an opportunity to even know that it was coming forward, and an opportunity to sit down and try to sort that out."
Rising prices also drive foreclosures
Another factor is the housing market in Maryland, says Eric Brown, director of the Prince George's County housing department.
"We're beginning to see values rise, we're beginning to see houses staying on the market for a shorter period of time, people beginning to get closer to the asking price for their home," Brown says. "So there's that glimmer of hope that things are turning around."
Prince George's was one of the areas hardest hit by the foreclosure crisis in the state. But last year, housing prices in Prince George's had the second fastest growth of any jurisdiction in the region, increasing by 16 percent.
That rebounding market is encouraging banks to foreclose on homeowners who are late on their payments.
"The banks say, if the market is getting better, then I can push these things out quicker," Brown says. "I don't need to let the delinquencies lay around as long as they have been."
Lenders who foreclose now will likely get more for a property than they would have a few years ago.
"So you've got good news and bad news. The good news is that the market's improving," Brown says. "The bad news is that the banks and the servicers are trying to move foreclosed properties much faster than they had been in the past."
Settlement funds won't solve all problems
Prince George's County got $10 million from the national mortgage settlement, following the robo-signing scandal. Most of that money is going to prop up struggling neighborhoods: rehabbing vacant homes, and helping new homeowners buy houses.
Donna Hurley is a housing counselor in Prince George's and she was recently part of a foreclosure task force convened by the county council. She says the county is focusing too much on new homebuyers. Of the $10 million settlement, only a fraction is going to current homeowners who are in trouble. She says it's only enough to help about 200 with mortgage assistance.
"When you start looking at the amount of people that are in trouble, 200 homeowners is like the tip of the iceberg."
Hurley runs a non-profit called Housing Options & Planning Enterprises, or HOPE.
"We do homebuyers' education, we do financial literacy, so we want to create new homeowners. I just don't think we should be creating new homeowners on the back of homeowners that are losing their homes."
The amount of money delinquent homeowners owe isn't all that much — less than $10,000 on average, in Prince George's. The problem is that so many people have lost income in the recession, that even getting current on their mortgages may not make a home affordable.
For Nana Malaya, who was facing foreclosure on her storm-ravaged condo, things started looking up when she got more hours at a part time job. She also worked with HOPE, and last September, she got good news from her mortgage company.
"I'm doing cartwheels, there's bells, there's confetti going all around. I was able to get a modification, it's very reasonable. My company's also working with me in ways which I was surprised, they're very courteous. It's almost like a 360 kind of turn."
Of course, not everyone can get a loan modification or other assistance: thousands will lose their homes before this is all over.
Clarence Snuggs, at the Maryland housing department, says many of the foreclosures happening now are part of a backlog left over from the recession. He expects lenders to work through that backlog within the next year. So by 2015, he says the state's foreclosure rate should return to pre-recession levels.
[Music: "To Build A Home (Jernalism Dub Step Remix)" by The Cinematic Orchestra ]