'Drowning' in mortgage cost? City offers help

Seattle wants to figure out how to help residents avoid losing their homes while there are still relatively few facing foreclosure.

"Very fortunately, here in Seattle we've been spared from the worst of this crisis, at least so far," Mayor Greg Nickels said Wednesday. "But I don't think we can take anything for granted."

Nickels announced that the city would provide $200,000 through nonprofits Solid Ground and the Urban League to about 40 families, up to $5,000 each. Those loans would help keep borrowers current on their mortgages, making it easier to sell, refinance or work out deals with lenders.

To qualify, households must earn less than 80 percent of median income, or up to $48,000 for a family of two and up to $60,000 for a family of four. This would be a "demonstration" project that city officials would review in six months, then possibly expand, Nickels said.

Homeowners would repay the loans, with no interest, when they sell, refinance or rework their loans.

"If an individual is drowning, they want a rope," said James Kelly, president and chief executive of the Urban League of Metropolitan Seattle. "The city is now providing a rope for these individuals."

The number of King County properties facing foreclosure rose 17.5 percent last year compared with 2006, according to RealtyTrac, an Irvine, Calif., company that tracks foreclosures. The increase and the number of foreclosures per household in this area, are far lower than troubled areas like Stockton, Calif., Las Vegas and Detroit and the national figures overall.

Solid Ground Executive Director Cheryl Cobbs said calls to her agency from homeowners facing default rose by one-third last quarter, compared with the same quarter of 2006.

Exotic mortgages -- such as those where artificially low introductory rates reset to much higher payments -- exacerbate temporary problems caused by crises such as injury, illness and loss of income, she said.

Citing statistics, Nickels said that each foreclosure costs about $73,000 in lost taxes, equity and administrative costs -- with effects on governments, homeowners and lenders -- and drags down the values of nearby homes by $5,000.

He also noted the city's lack of homes affordable to many workers and urged the City Council to act quickly on his two recent proposals to help provide more affordable housing.