When it comes to foreclosures, Prince George's County is still Ground Zero in Maryland, as the state continues to have one of the highest rates of foreclosure filings in the nation.

Foreclosures made up 34.6 percent of the county's total home sales in the first quarter of 2010, according to data company RealtyTrac. That was the highest percentage in Maryland, with Washington County the only other county above 25 percent. Prince George's total of 881 foreclosures in the quarter was well above that of the next county, Montgomery, which saw 704 filings.

The lowest number and percentage was in Somerset County, where foreclosures made up only 8 percent of sales in the first quarter. Statewide, foreclosures accounted for about 20 percent of sales, lower than the national average of 31 percent.

But Maryland still ranked 10th in the nation in the rate of foreclosures, with one for every 399 households in the state receiving a foreclosure notice in May. The rate was up 7.5 percent from April and 65 percent from a year ago. Nationally, the rate of one for every 400 households was down 3 percent from April and up less than 1 percent from a year ago.

The rate continues to increase despite state officials creating a Homeownership Preservation Task Force and trying various measures to stop the bleeding. On Thursday, Gov. Martin O'Malley's (D) office sent out a news release touting the state's new foreclosure mediation law that took effect Thursday. The release claimed that Maryland has become "a national model in combating foreclosures by developing a comprehensive strategy that includes legal and regulatory reforms and housing counseling and legal assistance networks."

Under the program, lenders must provide information on options available to homeowners when notifying about possible foreclosures. A lender also must file an affidavit attesting that it has fully evaluated the homeowner's eligibility for loss mitigation programs and state the basis for any denial before proceeding with foreclosure. Lenders also have to send homeowners a form about foreclosure mediation.

Getting assistance

Real estate agents in Prince George's are making hay out of the generous foreclosed-homes inventory through the county's Neighborhood Stabilization Program, a down payment assistance initiative that began with a $10.8 million federal grant last July and has recently received additional funding to extend the program through July 15. The program has worked with banks and sellers to facilitate the sales of more than 569 foreclosed homes, said Rosalyn B. Clements, project manager for the county program.

The program, which is also offered in Montgomery County, has been a deciding factor for some buyers, said Brian Austin, a broker with Royal Realty in Mitchellville. Clearing the foreclosed inventory is essential before the county is able to effectively move other homes on the market, he said.

"I'm hopeful these sales will continue. In my opinion, we've gone through the worst of it, but they are predicting another flood of foreclosures in the future," Austin said.

This concern over the shadow inventory, homes expected to go into foreclosure once moratoriums and extensions wear off, is shared by others in the market, such as Andre Smith, managing partner of Horizon Signature Properties in Greenbelt. Smith is also wary about people who might decide it's easier to go into default than continue to fight for their house.

But Smith also views such situations as likely to generate a buyer's market and even persuade buyers who have been waiting to see how low the market will get to more seriously consider buying.

Foreclosures are also contributing to some of Baltimore city's sales, making up more than 18 percent of them in the first quarter. Paige Cosgrove, manager for the Federal Hill and Compton branches of the Boston Street Team, expects foreclosures to be a significant part of sales for the next four years.

"They're just the easier transactions," she said.

Foreclosures are helping sales because "customers can pay the wholesale price instead of the retail price," said Judy Walters, owner and broker with Sykesville real estate firm Amazing Grace Realty. "They are able to buy in places ... where they may have not been able to before," she said.

However, foreclosures are hurting sales of new homes, said Denise Jacoby, executive officer of the Frederick County Builders Association. A newly-constructed house often "gets appraised for less than the cost of construction," Jacoby said.

James M. Blaney, president of the Carroll County Association of Realtors and owner of Realty World Unlimited in Eldersburg, acknowledged the impact of foreclosed properties on home sales but said a buyer must have access to funds to make improvements to those properties. He added that the response time when trying to purchase a foreclosure can take up to six months.