Marylanders are hearing the popping housing bubble along with the rest of the country. A new study shows that subprime foreclosures could make property values drop $2.73 billion and result in a loss of $19.1 million in tax revenue by the end of 2009.
The same study, commissioned by the Baltimore Homeownership Preservation Coalition, shows that the percentage of people paying more than 30 percent of their household income for their mortgage has risen from 23 percent to 30 percent from 2000 to 2006 in Maryland. Experts say you should spend no more than about 30 percent of your income on housing.
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That?s bad news. And it?s particularly bad news in a state where our legislators have decided to raise our taxes across the board starting after the holidays.
If the study had been released prior to the special session, maybe legislators might not have so quickly voted to drain the pockets of Marylanders. If legislators had waited, they also would have found out that African Americans are much more likely to hold subprime mortgages than the rest of the population. Fifty-two percent of home purchase subprime loans in Maryland in 2006 were held by African Americans, according to the study. That means blacks are the ones most likely to face foreclosure and to be stretched beyond their means. And since statistically blacks and other minorities are more likely to smoke than the rest of the population, they will be the ones worst hit by the newly enacted $1 a pack cigarette tax hike.
The first order of business for state legislators must be to repeal the new taxes upon return to the regular session in January. That would provide immediate relief for those struggling to make ends meet each month. The sooner the better. The fact that the Federal Reserve lowered its key lending rate Tuesday for the third straight time shows how serious the economic problems from the housing fallout are and that they will not go away soon.
Repealing taxes is a much better solution than asking banks to freeze interest rates for a certain group of homeowners, as President Bush?s plan calls for, or extending credit to troubled lenders, as the Federal Home Loan Bank of Atlanta has done ? including $51 billion to Countrywide as of Sept. 30.
Bush?s (voluntary) plan means bank customers in good standing will subsidize those who made bad choices. Extending credit to faltering lenders like Countrywide makes taxpayers vulnerable to a massive default. That?s corporate socialism at its worst.
Attorney General Doug Gansler could also help Marylanders. His main interest may be prosecuting polluters, but he would better serve the state?s residents at this time by thoroughly investigating those lenders who withheld information from clients and/or who sold loans to people they knew could not afford them. That would send a powerful message to unscrupulous lenders that they are not welcome in Maryland and help to prevent future fraud ? and personal and statewide economic chaos.
