One in five Baltimore City homeowners who took out a subprime loan on their home are now delinquent on their payments, according to preliminary results released Thursday of a study that attempts to map out the scope of the subprime mortgage crisis in the city and state.
Nearly half of home purchases in Baltimore City last year were paid for with subprime mortgages, the study said.
Preliminary results of the study, conducted by The Reinvestment Fund on behalf of the Baltimore Homeownership Preservation Coalition, found subprime loans accounted for 43 percent of home purchases and 52 percent of home refinances in Baltimore City in 2006. By September of this year, one in five subprime borrowers and one in four adjustable-rate subprime borrowers were delinquent.
“We can no longer say we don?t know exactly what the problem is, it?s pretty clear there?s a problem,” said Joanna Smith-Ramani, co-chair of the coalition, which will publish the full report in January. “We all share in the cost of this issue and responsibility for finding a solution.”
Statewide, the study found 33 percent of Marylanders who purchased homes and 34 percent of those who refinanced homes did so with subprime loans. Delinquency rates for subprime borrowers statewide increased to 21 percent in September from 14 percent a year before.
The study, citing the U.S. Congress Joint Economic Committee, said subprime foreclosures before the end of 2009 would cost Marylanders $2.73 billion and Baltimoreans at least $122 million in property-related wealth.
The new data came the same day President Bush unveiled a plan to freeze rates on some subprime mortgages for five years, covering loans made from the start of 2005 to July 30 of this year and scheduled to reset in the next three years.
“This is a Band-Aid which will buy us some time, but we need more sweeping reform that will help people with mortgages predating 2005,” said Peter Morici, economics professor at the University of Maryland and former chief economist at the U.S. International Trade Commission.
“A lot can happen in five years,” he said. “But it only deals with a window of mortgages. This doesn?t deal with the systemic problems in the mortgage market.”
Smith-Ramani said the president?s plan and cooperation from lenders in addressing the crisis was “encouraging,” but added a variety of options and assistance was needed to help homeowners.
“This will serve one slice of the population going through foreclosures,” she said. “What we have to remember is one [solution] won?t be enough.”
The Associated Press contributed to this report.
