Montgomery in Grip of Foreclosure Crisis - Washington Post

Heavily Populated Areas Hit Hardest; Germantown, Olney Seen as Next Hot Spots

By Philip Rucker | Washington Post Staff Writer |Thursday, July 24, 2008; GZ01

The wave of foreclosures that has rippled across the Washington region has been centered in Prince George's and Prince William counties. But a recent analysis of real estate data suggests the pace at which some Montgomery County homeowners are losing their homes is quickening.

The Germantown area was identified as an "impending hot spot," where foreclosures have been on the rise, and the Olney area was named a "potential hot spot" because of its particularly slow housing market, according to a regional foreclosure report released last month.

The report says more than 1,400 foreclosures occurred in Montgomery in the 12 months ending in February. The largest numbers of foreclosures occurred in the heavily populated areas of Silver Spring, Germantown, Gaithersburg, Rockville and Montgomery Village.

The report, prepared by the George Mason University Center for Regional Analysis, revealed that the Washington region has one of the fastest-growing foreclosure rates in the nation, outstripping those of most major metropolitan areas. Throughout the region, the study identified other impending or future hot spots, including Centreville, Falls Church, Herndon and Vienna in Fairfax County, the city of Alexandria and Adams Morgan in the District.

Over the past year, the number of foreclosures per 10,000 homes jumped from 23 to 131 in the Washington area, and the national average rose from 58 to 87, the study says. It was commissioned by the Metropolitan Washington Council of Governments and Freddie Mac, the McLean-based mortgage giant.

Montgomery County Council President Michael Knapp (D), who chairs the council of governments, represents Montgomery's upcounty, where analysts predict the number of foreclosures could rise because of the large stock of new housing occupied by young families. Knapp said the report highlights the reach of the foreclosure crisis.

"It quantifies the magnitude, alerts us to the fact that it's not going away and forces us to get together to address the issue," Knapp said.

In Germantown, the number of home sales declined by more than 50 percent between the first quarter of last year and the first quarter of this year, the report found. In Olney, the decline was 71.4 percent. Such a dramatic slowing of the housing markets in those areas indicates that they have not seen the worst of the foreclosure crisis, the report says.

Ralph F. Boyd Jr., chairman of the Freddie Mac Foundation, said the study confirms what he has been witnessing in Montgomery and across the region.

"The study gives some concrete data points from what we all feel and perceive from just living the last year," Boyd said. "It's one thing to perceive things and to believe things, but it's helpful to have some data that shows what really is."

Knapp said the foreclosure problem in Montgomery is so widespread that officials cannot ignore it.

"I still think there's an opportunity, too, for us as local jurisdictions to work with individual families to actually keep the families in their homes," Knapp said. "Then, in the instances where we've missed that opportunity to look for the silver lining, to see if there's a way we can address the affordable housing issue."

The crisis ballooned in part because many new homes were sold to first-time home buyers, some of them immigrants, under loans with adjustable rates. When the rates adjusted upward and the monthly payments increased, many buyers were unable to keep up, which led to foreclosures, said the report's author, John McClain, deputy director of the George Mason center.

Montgomery's Department of Housing and Community Affairs has a Web site with tips for residents on saving their homes and avoiding scams. The county also has been hosting workshops for homeowners at risk of foreclosure.

This comes as the state government is implementing some of the nation's most comprehensive foreclosure legislation. The laws, passed in this year's General Assembly and signed into law in April by Gov. Martin O'Malley (D), toughen oversight of the mortgage-lending industry and establish preemptive measures to help people at risk of losing their homes, such as extending the foreclosure timetable from 15 to 150 days.

In addition, many area nonprofit organizations are expanding their services for at-risk homeowners. The council of governments established an emergency fund with private contributions to support nonprofit groups that provide mortgage counseling and money for shelter, food and utilities for affected homeowners.

The Nonprofit Roundtable of Greater Washington released a report last month, "You Have 10 Days to Move Out," that highlights the work of agencies on the front lines of the foreclosure crisis. Many nonprofit groups reported being inundated by requests for help from people whose lenders were ordering them from their homes.

"Looking ahead, things are going to be tough," said Chuck Bean, executive director of the Nonprofit Roundtable. "I think nonprofits, particularly in those 'hot spots,' are going to require meaningful infusions of resources to meet this escalating demand."

The Latino Economic Development Corp., a District-based nonprofit organization, opened a satellite office in Wheaton in March to provide foreclosure counseling to needy homeowners, particularly immigrants.

Executive Director Manny Hidalgo said he had anticipated having 60 foreclosure cases in the group's first year in Montgomery.

"Now we're looking at having to do at least 300," Hidalgo said. "That's a substantial increase in what we anticipated doing."

Hidalgo said he is concerned that the number of foreclosures could scare some Montgomery renters from buying homes in the future.

"Our concern is: Will this have a chilling effect on people wanting to buy homes, new immigrants coming to the area who instead of seeing this as a land of opportunity see this as losing all of your life savings?" Hidalgo said.