By Mike Sarzo

Sentinel Staff Writer

The impact of the sub prime mortgage crisis will be felt locally, nationally and worldwide, Rev. Jesse Jackson said Dec. 13 in a press conference arranged in the driveway of a Fort Washington man who is facing foreclosure after his mortgage payment nearly doubled.

"Yesterday European banks have a plan to bail out the American banks; that's because this crisis is creating a global economic crisis," Jackson said, adding later that European banks put up $60 billion Dec. 12 to bail out American banks. He also added that a Saudi Arabian businessman is working to bail out Citibank because of the potential global effects of the sub prime mortgage issue.

Prince George's County leads the state in foreclosures with 13,172 according to Jackson. The foreclosures affect 300,000 homes in the county because a foreclosure on one house causes the neighboring house to devalue, he said.

"If you foreclose, it affects your neighbor," he said. "Devaluation in this county alone is about $3 billion, the size of the county's budget."

Cate Williams, vice president for financial literacy at Money Management International, a credit counseling company, said the mortgage crisis had roots established seven to eight years ago, when she said housing prices began to climb.

"For the average American the dream of owning a home was slipping away," Williams said.

She said banks created what she called "vegetable soup" mortgages, which included adjustable rate mortgages, which she said allowed some customers to get in the door, but she added they were not well explained with what she called "warning labels.

"The marketplace allowed [banks] to offer [the adjustable rate mortgage] to people who were stretched in terms of their credit to begin with," she said. "The marketplace brought some homebuyers in who weren't... as educated or have as many what I call shock absorbers."

Mark Johnson, the owner of the house where the press conference took place, said his mortgage increased from about $1,700 per month to just over $3,000 per month as a result of the sub prime loan he took out. He said he lived at the house on Farmer Drive since December 2004 and that he took out an adjustable rate mortgage on the house.

Jackson stepped in when he said a reporter's questions suggested that Johnson could have prevented himself from facing foreclosure "had he known better."

"You should be able to trust your banker. This was a betrayal of trust," Jackson said. "If you go to the doctor today and you have a headache and the doctor gives a diagnosis and offers medicine if it's the wrong medicine, it's not because you were stupid, it's because your trust was betrayed by your doctor."

"Today we've got customers who were ill informed about the product they were getting into," Williams said. "That to me is the most tragic thing about this."

She added that as house values increased, taxes and insurance rates also rose for families before adjustable rate mortgages increased.

President George W. Bush's recent bailout plan doesn't go far enough to solve the problem of foreclosures, Jackson said, pointing to the voluntary nature of Bush's program to freeze adjustable mortgage rates for five years.

"By and large they will not do it because it's voluntary," Jackson said. "There is no structure in place to in fact begin to exact from them exploitative amounts of resources. There must be some government plan in place because it's about sparing the nation a recession."

Glenn Mueller, a professor at the Burns School of Real Estate and Construction Management at the University of Denver, went even further. He told The Denver Post "the liars have won," saying that the mortgage plan rewards the lenders, whom he called cheaters.

However, Robert Steel, the undersecretary of the treasury for domestic finance, told National Public Radio that the Bush plan will buy affected homeowners time to refinance their mortgages.

"Our approach was first to identify these people, and then to make sure that they had independent counselors working with them to help them devise the best strategy," Steel said. "Now, we're talking about what products are the best to those people who can stay in their home in a sustainable way, what are the right products."

Williams said that families facing hard financial times as a result of the adjustable rate mortgages should take a "deep, deep look" at their finances.

"I know in some cases that sounds like an exercise in futility, but I'm sure you and I could find an extra $100." She said cutting back on expenses by going out to eat less often, cutting out trips to coffee shops such as Starbucks or other non-essential expenses could save families some money.

Williams added some specific tips for families to deal with mortgage woes: Budgeting, communicating with lenders and choosing a mortgage product that will get them through until rates decrease.

"We're all part of that rising tide. It's just not John and Mary," she said.

Contact Mike Sarzo at

editor-pg@thesentinel.com

or pgsentinelmike@yahoo.com

Photo by Mike Sarzo