The mortgage crisis will likely become a homeownership crisis in 2008 and 2009. District residents will experience flat to declining home values at the same time a significant percentage of residents who purchased or refinanced their homes in the past two to five years will face upward adjustments to their interest rates and payments.

Much of the homeownership difficulty will be the result of the increase in subprime lending in 2004-2006, which grew to 21 percent of all loans in DC in 2005-2006, according to Center for Responsible Lending (CRL). The CRL data shows subprime foreclosures up by 400 percent from fourth quarter 2005 to second quarter 2007, with almost one in seven subprime loans delinquent in second quarter 2007, compared to one in 50 prime loans.

Typical high-cost subprime mortgage loans have $5,000 more in closing costs and also involve monthly payments that are $200-$400 higher over the life of the mortgage than on responsible fixed rate loans. The subprime mortgage dominance in lower income neighborhoods unnecessarily robs communities of over $1 million of equity and $500,000 a year of spending power for every 200 homeowners affected.

We believe the District of Columbia can cut subprime loans in half just by using existing education and lending resources.

The experience of mortgage professionals and housing counselors indicates that at least half the people with subprime loans would have qualified for a prime, responsible mortgage loan, and that a majority of homeowners with subprime loans that are not delinquent (6 out of 7) can get out of these loans and qualify for fixed rate loans that save them hundreds of dollars a month.

The District has a strong network of nonprofit counseling organizations, supported by District and federal funding, available to help homebuyers and homeowners avoid subprime loans and to help guide them to get into responsible purchase and refinance loans. Concerned residents should contact one of the HUD-approved counseling organizations listed below and at www.HUD.gov. These organizations will provide information, analysis and recommendations for next steps to help borrowers get a better, affordable mortgage loan which can help them save money and provide increased financial stability. These organizations are available to every resident, regardless of income, and the counseling is free.

It is very possible that half of the subprime loans in the District could be eliminated in two years. First, if every prospective buyer were to review their proposed loan offers with and obtain advice from a counseling organization, they could get into a stable fixed rate mortgage from the start. Secondly, if every existing homeowner with an adjustable rate mortgage (especially loans from subprime lenders and loans with option payments and interest-only payments) were to review and understand their current mortgage through discussion with a housing counselor, they would learn how to seek out a responsible loan which could stabilize their mortgage payment.

For first-time home buyers, the District provides the country’s strongest support for responsible, low-cost mortgage loans. The DC Home Purchase Assistance Program (HPAP) and the DC Employer-Assisted Housing Program (EAHP) provide second mortgage loans with 0 percent interest that can reduce the first mortgage amount, eliminate monthly mortgage insurance and save home buyers $400-$500 a month in payment. The District also has responsible lenders offering fixed rate, low-fee loans for first-time buyers as part of national bank Community Reinvestment Act programs. Prospective buyers need to investigate all their options before agreeing to terms with a lender.

Existing homeowners need to be persistent in searching out true fixed rate refinance loans with low fees, low rates, and good terms. Refinance fees should be no more than $2,000-$2,500 total, exclusive of prepaid interest, taxes and insurance. With diligent effort, borrowers can find lenders, both for-profit and nonprofit, who will do responsible refinance loans.

District residents and leadership should not sit back and watch the subprime mortgage crisis become a homeownership crisis. Residents and leaders need to take action to alert all at-risk homeowners and homebuyers to take advantage of the organizations standing by to provide expert analysis and advice to avoid the problems unfolding across our neighborhoods.

For housing and mortgage counseling, call DC Housing Financing Agency at 202-777-1600; Housing Counseling Services at 202-667-7006; Latino Economic Development Corporation at 202-588-5102; Lydia’s House at 202-373-1050; Marshall Heights Community Development Organization at 202-396-1201 ext. 132; or University Legal Services at 202-547-4747. For mortgage counseling, call Manna Mortgage at 202-832-1845.