May 12 , 2008
Philly.com

Ahead: More rate hikes, more foreclosures

By Dan Geringer

Hundreds of Philadelphia homeowners now facing foreclosure could become thousands in the next two years as teaser-rate adjustable mortgages skyrocket to double-digit interest rates.

The city's foreclosure crisis, bad as it is right now, could become an epidemic in the near future if beleaguered borrowers don't reach out to the counselors standing by to help them, said John Dodds, director of the nonprofit Philadelphia Unemployment Project (PUP), which counsels threatened homeowners,

"I've got a house in Olney, a neighborhood where 44 percent of the mortgage loans made in 2005 were subprime," he said, calling those loans "a ticking time bomb," ready to explode when the low single-digit "introductory" rates reset this year or next into the double digits, causing monthly mortgage payments to rise beyond the homeowners' ability to pay.

Dodds said that in 2005, more than half the mortgages in Southwest Philadelphia, West Philadelphia/Parkside, East Germantown, Logan/Ogontz/Fern Rock and West Oak Lane were sold at deceptively low teaser rates that will suddenly become double-digit nightmares when they readjust.

"They were giving subprime adjustable rate mortgages out at the drop of a hat," Dodds said. "Anybody that had a pulse was able to get $100,000. When those rates reset in the double digits, the borrowers can't make their mortgage payments.

"Now, who's going to buy those houses that are up for sheriff's sale? Since the foreclosure crisis has hit, you need prime credit to get a mortgage loan so nobody can get the mortgage money to buy those houses. They sit there empty. Maybe somebody decides they want to use one for a crack house or somebody decides steal all the pipes.

"Windows get broken and boarded up. Everybody's property values go down. Two or three years from now, are places that never had abandonment problems going to have them?"