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Going, going ... foreclosed

September 15, 2007|By ANDREW SCHOTZ

Who's to blame - the buyers or the lenders?

Why did the number of foreclosure filings in Washington County soar this summer, in line with a national trend?

Were people purchasing houses beyond their means?

Were lenders approving mortgages that home buyers couldn't afford?

"I'm not sure where the problem lies," said Hagerstown attorney Alex Bognar, who handles debt-relief cases. "I think it lies on both ends."

Bognar said many of his clients are people from Montgomery County, Md., or Northern Virginia who overestimated the Washington County housing market and greatly overpaid for houses they now are stuck with.

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One thing for certain is there's plenty of business these days for people such as Mike Donofrio.

Donofrio, of Alex Cooper Auctioneers, sells property that slips from the financial grasp of its owners - foreclosed houses. He stands in front of the Washington County Courthouse and conducts foreclosure auctions, often drowned out by the roar of passing traffic.

The number of foreclosure auction notices filed in Washington County shot up to 58 in July, more than twice what it was in July 2006.

Last month, there were 62.

The sharply higher numbers for those two months followed about a dozen months in which the number of foreclosure notices was mostly in the 20s or 30s.

Observers say Washington County is part of a nationwide phenomenon that's focusing attention on lending practices - particularly when people with bad credit sink with risky mortgages.

Bognar said that not long ago, maybe one in 10 personal bankruptcy filings his office handled was sparked by a mortgage problem. Credit-card debt was dominant.

Now, about eight in 10 personal bankruptcies are related to mortgages - especially those with adjustable rates, he said.

Up all over

The number of foreclosure filings in the United States rose 93 percent from July 2006 to July 2007, according to RealtyTrac, which runs a national database of foreclosure and bank-owned properties.

In Maryland, foreclosures went up 575 percent. Pennsylvania stayed roughly the same, while West Virginia, with one of the country's lowest rates, dropped 10 percent.

Maryland Gov. Martin O'Malley has created a task force to study foreclosures and lending concerns. That panel is supposed to make recommendations by October, in time for possible legislation in the next General Assembly session.

Douglas F. Gansler, Maryland's attorney general, has set up a similar study group.

President Bush recently proposed reforms to the tax code and lending laws. The Federal Reserve and other banking regulators have urged loan service companies to work with borrowers who are in danger of defaulting on home mortgages, The Associated Press reported.

Although some say "let the buyer beware," U.S. Sen. Charles Schumer, for example, accused one top lender of steering customers to high-interest adjustable-rate mortgages. The lender denied the allegation.

Jeffrey Fisher of The Fisher Law Group in Upper Marlboro, Md., which handles foreclosures in Washington County and other parts of the state, said he's noticed the rising tide.

Fisher said Maryland might be in better shape than other parts of the nation because it relies more on government jobs, which, as a group, are steadier than private-sector jobs.

"You have a better employment base here," he said.

Fisher said subprime loans clearly are driving the mortgage-failure bust cycle.

"Those excesses are all coming home to roost," he said.

Thomas Shaner, the executive director of the Maryland Association of Mortgage Brokers, was less sure.

Whatever the trend has been, there's no way to pinpoint the cause, he said.

"The first thing is there really is not substantive data that everybody agrees with ..." Shaner said. "No one has anything more than assumptions that it's these exotic mortgages that led to this. I don't think that it's the product by itself."

Sheryl Greenwald, a mortgage sales manager for Fulton Mortgage Co., a division of Hagerstown Trust, said homeowners need to stay within their means when borrowing.

Under Federal Housing Administration guidelines for loans, housing expenses plus long-term debt should not exceed 41 percent of an owner's gross monthly income, according to the FHA Research Center's Web site.

"I think we're overusing credit in this country," said Ray Johns, who taught economics at Hagerstown Community College, previously Hagerstown Junior College, for 25 years.

Johns said he wondered why so many college students are given credit cards when they don't have jobs.

On the auction block

Locally, Aug. 29 illustrated the foreclosure surge.

Five foreclosure auctions were to be held outside the Washington County Courthouse on West Washington Street, one per minute, starting at 12:45 p.m.:

? 13841 McIntosh Circle in Clear Spring

? 23312 Angela Court in Smithsburg

? 18233 Rockland Drive in Hagerstown

? 6332 Coffman Road in Keedysville

? 820 Chestnut St. in Hagerstown

Three of those sales were canceled before they happened.

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