WYPR: Local Economists Discuss Housing Crisis (2008-04-29)

With statistics indicating that over the next two years, one in 26 Maryland homeowners with sub-prime mortgages will be at risk of losing their homes to foreclosure, the topic is paramount these days in public concern and debate. WYPR reporter Melody Simmons went to a forum on the crisis Monday afternoon, where she heard more dire forecasts.

After a nearly two-hour session, the group of 150 students and economics experts rendered a polite round of applause in a large lecture hall. But many questions remained unanswered following a panel discussion on today's housing crisis and its ripple effect on the economy. Like this one from a student at the University of Maryland Baltimore County.

TAPE: (8 SECONDS), track 326, 00:01
IC: You mentioned that financial illiteracy is at the root cause of this problem and I was wondering what the state of Maryland is doing to increase financial literacy?

Thomas Perez, state secretary of the Department of Labor, Licensing and Regulation, said homeowners need to know more about the complex mortgages they are entering into. They can receive emergency financial counseling, thanks to an infusion of federal funds. And state officials are working to build partnerships with a variety of groups from lenders to clergy members help stave off foreclosures. Perez likened the challenge to trying to fix another national crisis.

TAPE: (9 SECONDS), track 321, 00:01
IC: A lot like the health care crisis. Health care, a lot of talk, a lot of chatter in Washington, but the real innovation is occurring at a statewide level, and at local levels.

Regarding mortgages, Perez said the problem impacts every corner of every county in Maryland, particularly communities of color where 54-percent of African Americans and 47-percent of Latinos hold sub-prime loans. He called the sub-prime meltdown a civil rights issue in the state where 35-hundred foreclosures in 2006 skyrocketed to 23-thousand in 2007.

The secretary hailed recent state legislation and proposed regulatory reforms that tightened regulations on mortgage brokerage houses like Countrywide Financial. Some mortgage brokers, have little training.

TAPE: (8 SECONDS), track 320, 00:22
IC: Part of the problem here was that we had what I would call the wild, wild West in Maryland. Until recently, it was far more difficult to become a barber than it was to become a broker.

Marc Steiner, former WYPR talk show host and moderator of the panel, talked about the predictions of some economists nearly a year ago.

TAPE: (10 SECONDS), track 328, 1:17
IC: When this first happened, I talked to a number of investment bankers. All of them said to me, Nobody in America, unless you're in this business, realizes how close we are to the edge of the entire thing falling apart.'

Collapse or no collapse, most consumers will feel the crisis, said Robert Carpenter, a professor at UMBC and senior financial economist at the Federal Reserve Bank in Richmond. The hit will come in the form of higher state and local taxes, declining property values and plummeting home equity values.

TAPE: (8 SECONDS), track 328, 2:11
IC: What I see is a lot of uncertainty to really understand the situation I think it's important to do that on a local basis.

Breck Robinson, an economics professor at the University of Delaware, drove the point home further. Students needing college loans could be the next victims as the credit markets tighten.

TAPE: (10 SECONDS), track 331, 00:35
IC: It appears that there's going to be at least, if things don't change, a significant crunch for students looking for student aid. Beginning next fall? Yes.

All four panelists concluded the crisis is still evolving. The next shoe to drop, one of them said, could be construction and land development, spilling the problem into commercial real estate. No sector in today's turbulent economy {} they said { } is safe from the fallout.

I'm Melody Simmons, reporting from Catonsville, for 88.1, WYPR.