The number of Bowie area homes entering some stage of the foreclosure process has increased along with the national trend.The situation is likely to increase further if the housing market continues to soften and as adjustable rate mortgages begin to reset, according to real estate agents, mortgage brokers and bankruptcy attorneys in the area Bowie has had a substantial increase in foreclosures and notices of default because of the size and expense of many Bowie homes, combined with the modest, but inadequate, income of those purchasing these homes,” said John Burns, an attorney and chairman of the Prince George’s County Bankruptcy Laws Committee. “We find a number of folks were put into mortgages that they never should have been put into in the first place.”
Burns said he’s seen about a 20 percent increase this year in the number of people filing for bankruptcy in the Bowie area. He added that in the past, bankruptcy filings were mostly attributed to health-care costs, “but we’re seeing a shift in that the bankruptcy filings are now coming from an inability to keep up with the monthly mortgage.”
Many of Burns’ clients received subprime loans that let buyers into their homes with no money down. A subprime loan refers to any loan which would not fall into the A or A- “prime” mortgage category, and is basically for those people who have poor credit. Most subprime loans contain a two-year ARM with a low initial rate, often interest only. But when those rates expire, homeowners are likely to see their mortgage payments soar, even doubling.
“No one discusses how they will pay their mortgage once it jumps up,” Burns said. “You either have to sell your home, try to refinance at an affordable rate, or apply for bankruptcy. Otherwise, you’re stuck as the odd man out in a never ending game of duck, duck, goose.” Selling a house in today’s market isn’t going to be as easy as it was a few years ago during the housing boom.
According to local real estate agent Jane Gregory of Weichert Realtors, “houses in the 20715, 20716 and 20720 ZIP codes are taking an average of 5.9 months to sell when three years ago they’d sell in less than a week.” She added that the number of houses on the market may increase as buyers hold out for prices to drop further. In addition to a softening market, homeowners are having a harder time refinancing at conventional rates.
“People have stretched their income to the limit or beyond and in some cases they owe more on their homes than they’re worth,” said Robert Mercer, a local mortgage broker who experienced the mortgage crisis firsthand when his company, American Home Funding, filed for bankruptcy Monday. “To see this happen to the 10th largest mortgage company in America indicates the industry is scared.”
The actions of American Home Funding, which funds many Bowie home loans, follow financial troubles of other large lenders in the subprime category including Freemont and New Century. “Even buyers with excellent credit can get stung because mortgage companies that were once solid are now folding and are unable to fund loans they have committed to,” warned Gregory.
Despite the high levels of foreclosures and defaulting loans across the nation, one local real estate agent said that the Bowie area has not been hit nearly as hard as surrounding areas. “It’s not all doom and gloom in Bowie,” said Boyd Campbell, broker/owner of Century 21 Home Center. Other Bowie real estate brokers had similar comments. Detailed and specific foreclosure information for the city of Bowie is not available.
Foreclosure data on Prince George’s County as a whole shows a marked increase in foreclosures. Campbell, who has worked in the Maryland, Virginia and D.C. markets for some 30 years, said Bowie is fairing well and is more stable than Northern Virginia and Montgomery County. “Appraisers have been more conservative in Prince George’s County and investors haven’t invested as much here as in those areas,” said Campbell. “Now those investors are trying to get out of their investments and they’re flooding the market. There’s far more loan defaults, bank foreclosures and houses going to auction in those areas than here.”
By BARBARA SIGLER For the Blade-News