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Mortgage morass

Delinquencies are rising sharply.

JoAnn Brooks in the the living room of her home on Massey St. is southwest Phila. with pictures of her daughter, Rishea, 18, who is one of three children. Brooks was three month delinquent on her mortgagte payment but got help from ACORN. (Peter Tobia / Staff Photographer)
JoAnn Brooks in the the living room of her home on Massey St. is southwest Phila. with pictures of her daughter, Rishea, 18, who is one of three children. Brooks was three month delinquent on her mortgagte payment but got help from ACORN. (Peter Tobia / Staff Photographer)Read more

From gritty sections of Philadelphia to the curving, suburban streets of Willingboro, homeowners are in deep financial distress.

Borrowers in Lawnside and Willingboro, as well as parts of Camden and Philadelphia, are falling behind loans at frightening rates this year, according to an Inquirer analysis of the latest mortgage data. Payments on at least one-in-four dollars of mortgages were still unpaid after 30 days, as of Sept. 30.

The 30-day delinquency rate - the broadest measure of mortgage woes - reflects economic distress in neighborhoods from lost jobs, medical problems, and out-of-control spending. The rate includes loans in foreclosure, loans to bankrupt borrowers, and loans on houses that lenders have repossessed.

Missed payments, the first step on the way to default and foreclosure, are likely to become a bigger problem as companies cut hundreds of thousands of jobs. Moody's predicted that first mortgage defaults nationwide will climb to 3.08 million next year from 2.67 million this year.

In Washington, politicians and regulators are battling over how to help homeowners, with Federal Deposit Insurance Corp. Chairwoman Sheila C. Bair pushing for significant intervention, without much success so far.

In the Philadelphia region, mortgage problems extend beyond the expected urban neighborhoods, where mortgage troubles are layered on the scourges of crime and poverty.

Lawnside and Willingboro had the highest 30-day delinquency rates in the region, according to the zip-code level data from First American CoreLogic Inc.

It is not obvious driving through Willingboro, with its curving streets lined with mostly well-kept houses. In fact, many residents of the Burlington County township cannot pay their mortgages. Even people who live there have no idea of the scope of the problem, based on interviews with residents.

Charlotte Froman, president of the local Neighborhood Watch, called Willingboro "turtle town," because "people come in, close their doors, and don't come out until they go to work."

Even though average Willingboro home prices more than doubled during the housing boom, "people were able to get homes here at affordable prices" compared with surrounding areas, said Gordon Parks, a real estate agent in Willingboro since 1979.

Ray Taylor, for example, bought a house there in 2000 for $80,000 and spent thousands more remodeling, including $30,000 on the kitchen and bathrooms in 2006, expecting to be able to sell for $215,000. Then Willingboro home prices started falling.

"I spent a lot more money than I should," said Taylor, a former bail bondsman who took up real estate in November 2005. "The running joke is that I brought it on," Taylor said, referring to the real estate collapse.

Tough times in real estate, divorce and too much debt pushed Taylor into foreclosure. The house was repossessed at an October sheriff's sale. He is still in Willingboro, living with a friend.

"All things considered, it's a good town. I've been here since the '80s. I love it here. There are a lot of hard-working people here," Taylor said.

Unfortunately, too many of them resorted to expensive subprime loans. During the lending frenzy of 2005 and 2006, half of the first and second mortgages in Willingboro were subprime. Nearly two-thirds of them were refinancings.

During those years, many desperate borrowers nationwide refinanced from one bad loan to another to avoid skyrocketing payments from adjustable-rate mortgages.

Experts said mortgage problems were less severe in Philadelphia's Pennsylvania suburbs than in South Jersey because houses in Burlington, Camden and Gloucester Counties were generally less expensive.

"You can get either a more affordable house or a larger house for the same money, so it's really attractive for price-sensitive households," said James Hughes, dean of the Bloustein School of Public Policy at Rutgers University. "That's where people got very easily overextended. They may have bought too much house with too little down payment."

Willingboro and Lawnside ranked No. 1 and No. 3 in South Jersey in percentage of African American residents in 2000. "I don't think it's a racial thing. I think it's economic," Hughes said of the problem loans.

Berwyn's delinquency rate of 1.7 percent was the lowest in the region among zip codes with at least 500 mortgages.

In Philadelphia, mortgage problems are concentrated in an arc from Juniata Park through West Philadelphia down to Eastwick.

Two particularly troubled areas are zip code 19142 in Southwest Philadelphia and zip code 19138 in Northwest Philadelphia, including parts of West Oak Lane and East Germantown.

The hot real estate market earlier this decade appeared to be a boon for West Oak Lane. Seven years ago, the community was saddled with more than 300 vacant houses, said Jack Kitchen, president and chief executive officer of the Ogontz Avenue Revitalization Corp.

That number has dwindled to fewer than 70 now, Kitchen said, thanks to an effort to market West Oak Lane as a place with relatively affordable houses.

But it also brought trouble.

"As word got out about the housing stock that was available in West Oak Lane, we worked very hard to keep out predatory lending, but it was bigger than anybody could imagine," Kitchen said. "They come in with one loan, but they go out and refinance."

Refinancing enabled borrowers to capitalize on rising house prices to pay for home repairs or other expenses. The median price in the 19138 zip code jumped to $85,000 last year from $50,000 in 2000. In 2005 and 2006, 61 percent of refinancings were subprime.

All that risky borrowing happened despite an annual home-buyer education program sponsored by Rep. Dwight Evans (D., Phila.) that has reached 900 people over the last six years.

A program planned to start in January by four local nonprofit groups and funded by foundations and the state with Evans' help is aimed at aiding borrowers in sections of 19138 and 19142.

"We're trying to get a handle on the earlier delinquencies" because that gives the intervention a greater chance of success, said Patricia Hasson, president of the Consumer Credit Counseling Service of Delaware Valley.

There are some services in South Jersey, but nothing comparable to Philadelphia's extensive advocacy network.

Philadelphia also has a court-ordered procedure that has prevented hundreds of sheriff's sales by forcing lenders to meet with borrowers to try to work out a deal.

That program saved JoAnn Brooks, who lives in Southwest Philadelphia, close to where General Electric Co.'s hulking equipment factory used to stand at 69th Street and Elmwood Avenue.

Two houses on her block have been repossessed recently, including her neighbor's, according to RealtyTrac Inc. The area's 30-days-or-more delinquency rate was 26 percent in September, the city's highest.

Donna M. Henry, executive director of the Southwest Community Development Corp., said missed work for medical reasons was a major problem in the area.

That was a factor for Brooks, who was injured at her Rosemont College housekeeping job. She bought her three-bedroom house in 1999 for $60,000.

Now, Brooks, 44, has a new chance. Acorn Housing, a nonprofit group, helped negotiate a reduction in her interest rate to 5 percent from 12.75. Her new payment is $615.87, including taxes and insurance, down 17.6 percent from $747.58.

Her worker's compensation checks barely cover the new mortgage, but Brooks said she could rely on help from her three sisters and her three children, including her 18-year-old daughter who works from 4 a.m. to noon in a coffee shop at Philadelphia International Airport and then goes to college. Her sons, in their 20s, drive trucks.

"It's so important for me to keep this house. It's like a family house," where her sisters and their families gather for all the holidays and other special occasions, Brooks said. "By me having this house, I feel like I can keep the family together."

Mortgage Help

Acorn Housing: 215-765-1221

Consumer Credit Counseling Service of Delaware Valley (covers South Jersey): 215-563-5665

Philadelphia Unemployment Project: 215-557-0822

Save Your Home Philly Hotline: 215-334-4663

Southwest Community Development Corp.: 215-729-0800

West Oak Lane Community Development Corp.: 215-224-0880