The eviction from their million-dollar home could come at any moment. Keith and Janet Ritter have been bracing for it — and battling against it — almost from the moment they moved into the five-bedroom, 4,900-square-foot manse along the Potomac River in Fort Washington.
In five years, they have never made a mortgage payment, a fact that amazes even the most seasoned veterans of the foreclosure crisis.
The Ritters have kept the sheriff at bay by repeatedly filing for bankruptcy and by exploiting changes in Maryland’s lawsdesigned to help delinquent homeowners avoid foreclosure.
Those efforts to protect homeowners have transformed Maryland’s foreclosure processfrom one of the country’s shortest to one of the longest. It now takes on average 634 days to complete a foreclosure in Maryland, compared with 132 days in Virginia.
Champions of Maryland’s system, including Gov. Martin O’Malley (D), credit it with driving down the state’s foreclosure rate and helping thousands of victims of predatory lending, fraud and other abuses hang on to their homes.
“The market won’t fix itself,” said Anne Norton, Maryland’s deputy commissioner for financial regulations. “By the time it does, how many homeowners will be churned up and spit out by the machine?”
Critics, including economists and lenders, blame the state’s go-slow approach for a growing backlog of foreclosures and a weak-to-nonexistent recovery in home prices. To them, the system puts too much emphasis on helping individual homeowners and not enough on quickly clearing the market of foreclosures so prices can rebound and hard-hit communities can recover. And they say it also creates opportunities for abuse by those determined to drag the process out for as long as possible.
“How is it people can stay in a house for five years without ever making a mortgage payment?” said Thomas A. Lawler, a former senior vice president at Fannie Mae who now runs his own consulting firm in Loudoun County. “That’s a screwed-up process. It’s an example of how the process is broken.”
The Ritters, who bought their house for $1.29 million with almost no money down, are hardly representative of the vast majority of Maryland’s distressed homeowners.
During the boom, they set out to become mini real estate moguls, buying properties and flipping them for a profit. In the process, Keith Ritter, 54, went from being on probation for bankruptcy fraud and making minimum wage to being a successful real estate investor and landlord with a six-figure income. Then, when the housing market tanked five years ago, the couple found themselves facing multiple foreclosures.
The Ritters have tried to negotiate different payment arrangements with their lender to save their posh home near National Harbor, they said, but to no avail.
“It was never our intention to get here and never make a mortgage payment,” Keith Ritter said. “We don’t believe in living for free.”
But he and Janet, a 51-year-old real estate agent, make no apology for using every tactic available to them to stay in their house, including challenging the foreclosure sale in court, requesting mediation and claiming they had a tenant living with them. Their adversaries, they argued, are giant financial institutions with armies of lawyers that are out to make as much money as possible at the expense of homeowners.