Baltimore residents in danger of falling behind on their house payments can now dial 3-1-1 for advice from a mortgage education and counseling program.

A similar 3-1-1 program in Chicago helped 1,304 families stay in their homes, saving banks an estimated $77 million in foreclosure costs, according to a report on the three-year Home Ownership Preservation Initiative.

Baltimore’s $800,000 program is spearheaded by the Baltimore Homeownership Preservation Coalition, and will offer education, counseling and legal services. Half of the program’s cost is being covered by federal money administered by the city; grants from nonprofits and a private lender are picking up the rest of the cost.

Homeowners with mortgage problems will be able to dial 3-1-1 and talk to city operators who handle nonemergency police calls and other requests for services like bulk trash pickup, the Baltimore Sun reported. Calls for mortgage assistance will be referred to BHPC member St. Ambrose Housing Aid Center.

In addition to encouraging debtors in financial trouble to seek help before it’s too late to keep them in their homes, the program will also help prospective buyers review loan documents before they commit to a mortgage.

A report released today by a Philadelphia-based nonprofit, The Reinvestment Fund, looked at 25,616 foreclosures in the city between January 2000 through April 2005. The report found Baltimore’s foreclosure rate was nearly twice as high as Philadelphia’s, and stands in “stark contrast” to the state as a whole. Maryland has one of the lowest foreclosure rates in the nation.

Factors behind the high rate of foreclosure may include property-flipping scams, the widespread use of nontraditional loans such as adjustable-rate mortgages, and the city’s own defunct first-time home buyer program, which had a high rate of default, the report said.

Nearly one in 10 properties in foreclosure were purchased with assistance from the city’s Settlement Expense Loan Program, which provided second mortgages for 4,000 buyers between 1993 and 2000. Nearly half of those properties — 1,826 — were in foreclosure at some time during the period studied in the report.

“It is a historical fact that the SELP program was problematic,” the report noted. “The city recognized the difficulties with the program, ended it and established a revised program requiring home-ownership counseling.”

A high proportion of homes in foreclosure — 32 percent — were purchased with FHA-insured mortgages.  

The report estimated that subprime loans made up 55 percent of loans in foreclosure, compared with 49 percent of mortgages in the city overall. One in four properties in foreclosure were originally purchased with two or more loans, and 13 percent of loans in foreclosure had adjustable rates or balloon payments.

The areas with the most foreclosures tended to have higher percentages of African-American households, the report said. The typical home in foreclosure was a single-family row home with a current average assessed value of $49,600.

Most of the homes in foreclosure, or 55 percent, were purchased with no equity — the loans were equal to or greater than the sales price of the home. An estimated 38 percent of homes in foreclosure had been used as collateral for home equity or refinance loans.

The Reinvestment Fund report also looked at the economic impacts of foreclosure. Foreclosures have reduced property values in Baltimore by $1.8 billion, or 10 percent of the total assessed value of all residential real estate, the report estimated.

The report found investors — individuals or companies — snatched up more than a third of homes in foreclosure. While just 5 percent of foreclosed properties were purchased by limited liability companies (LLCs) in 2000, by 2005 LLCs were buying 17 percent of foreclosed homes.

Barbara Aylesworth, executive director of Belair Edison Neighborhoods Inc., told the Sun that investors who purchase foreclosed homes often do minimal repairs and rent them out, hurting property values. She said 37 percent of the 6,400 homes in the neighborhood have been in foreclosure in the last decade.

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