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By Michelle Williams and Tamra Tomlinson HUGHESVILLE, Md. - It was a September day in 2006. Anthony Proctor, a D.C. emergency medical technician, was smiling because he had just purchased his family’s first home. For many years he had lived in Washington and Maryland apartments. He was tired of paying too much in taxes. He wanted a place to call his own. “I wanted a peace of mind. When you come home, I wanted to say, ‘This is mine,’ ” said Proctor, 45. But less than a month after he purchased his family’s two-story home in the Tanglewood Townhomes subdivision of Waldorf, Md., that peace of mind began slipping away. In October 2006, Proctor injured his back helping a patient. He was put on work release at reduced pay for several weeks, he said, which made it hard for him to keep up with the mortgage and help provide for his wife, Wendy, and their two sons, now 8 and 15. Four months after the injury, he returned to work, in an attempt to catch up on mortgage payments. He worked extra hours, but faced another setback when he re-injured his back while lifting patients. The family's financial situation wasn't helped when, in early 2007, Proctor’s wife was laid off from her job at Staples. In April 2007, the Proctors received a notice from their mortgage company saying their house would be foreclosed by the end of May. The family wasn’t alone in receiving such bad news.
In 2007 Charles County led the state in the percentage of its homes suffering from foreclosure activity, according to RealtyTrac, a leading provider of foreclosure data. One in 62 households—or 1.60 percent of households—in the Southern Maryland county experienced foreclosure activity last year. Foreclosure activity includes notices of default, auctions and bank purchases of foreclosed homes. That same year, Prince George’s County had the second-highest percentage in the state, with 1.54 percent of its households in foreclosure activity, RealtyTrac’s data showed. How did so many get into such deep financial trouble so fast? 'Exotic Mortgages' Played a Role Mortage defaults have traditionally been the result of unexpected events like illness, unemployment or divorce, said Vicki Shultz, senior advisor for consumer protection at the Maryland Department of Labor, Licensing and Regulation. But the sharp increase in foreclosure activity in the last few years “hinges on the mortgage products themselves,” she said. The housing boom in the beginning of the decade brought a lot of new buyers to the market—some of whom had less than optimal credit. In the flurry of competition to get more buyers with weaker credit into more homes, lending standards were relaxed, Schultz said. Lenders devised creative mortgage products that would allow buyers who couldn’t qualify under traditional lending guidelines to get homes. Those products, sometimes referred to as “exotic mortgages,” often featured adjustable interest rates or reduced requirements for verification of income or assets. Studies, such as November’s Maryland Homeownership Preservation Task Force Report, show a correlation between creative lending products and the spike in foreclosures. The report also noted that the increased foreclosure activity disproportionately involves "non-bank loan originators" -- such as brokers. In many cases, brokers have incentives such as higher commissions "to steer consumers to higher costs or subprime loans" (loans which are generally tied to higher interest rates), the report said. Proctor's case is one example of these trends. To finance his house, Proctor said he used a broker who eventually sold his contract to Countrywide Financial Corp. The contract had Proctor receiving a mortgage product called 80/20 loans-- something Proctor said he didn't know too much about at closing. With 80/20 loans, borrowers usually receive an 80 percent first mortgage and a 20 percent line of credit so that 100 percent of their house is financed. No down payment is required. Borrowers can also get fixed or adjustable-rate mortgages with the loan program. Proctor’s 80/20 loans came with adjustable rates that will change in about two months, he said. At closing, his first mortgage came with a $1,600 monthly payment at a 9.99 percent rate. For the second mortgage, he agreed to pay $525 a month at a 13 percent rate, he said. But after he fell behind on the payments, Proctor said, Countrywide changed his monthly payment from $2,125 to about $2,900, in an attempt to make his account current. An employee fielding phone calls for Countrywide said company officials do not comment on individual cases; repeated calls to the press office yielded no response. The logic of the mortgage change eluded Proctor. "If I'm paying $1,600 and come across a hardship, and you increase the payment to whatever ... you're putting the person into a [worse] position they're already in," he said. Proctor's mortgage payment is set to increase again in a few months, he said, when his interest rates adjust. His monthly payments will increase by at least $300, he said. Belt-tightening to Make the Numbers Work Proctor's early euphoria surrounding his home purchase has been deeply dampened. “When you go through buying a house, you’re so happy. You got a mortgage company that’s going to help you and work together with you, and in fact, it’s not like that,” Proctor said. His house remains in the foreclosure process, and he is continuing to fight to save it. The family has had to cut back on food purchases, gas and other expenses, he said, in order to make the mortgage payments. He’s seeking help from the Southern Maryland Tri-County Community Action Committee, a Hughesville-Md., group that provides housing counseling, he said. La-Ronda Johnson, a housing counselor with the committee, said she’s been seeing Proctor for about a year and a half. Although Proctor still owns the house, he said the whole experience has been embarrassing. “I let my wife and my family down and as a man, as an African-American man, you can’t look at your wife and say, ‘Babe, we lost the house,’ ” he said. “That hurts. That’s a real sinking feeling.” |
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