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NORTHAMPTON - For years, the Valley Community Development Corp. has been at the forefront of helping low- to moderate-income people own their first homes. These days, the nonprofit group is doing all it can to help cash-strapped homeowners save the roofs over their heads.

To that end, the Valley CDC is seeking $86,000 in Community Preservation Act money to create a foreclosure relief fund. It would provide interest-free loans of up to $7,500 to city homeowners burdened by unsustainable mortgages.

The proposed pilot program seeks to prevent 10 to 15 foreclosures in Northampton over 18 months and is believed to be the first CPA-funded housing project of its kind in the state.

"The demand seems to be there," said Michele Morris, homeownership director at the Valley CDC. "It would be great if we could be ahead of it."

Morris said she is already working with about a dozen city homeowners in arrears on their mortgage payments. The majority of those people have so-called subprime or nontraditional loans that have pushed them into financial trouble, she said.

"I'm seeing nasty adjustables that were fixed at 10 percent really without the homeowner's knowledge," she said, when asked about the worst mortgages she's seen. "I think some of these were falsely modified."

In an August report, the Center for Responsible Lending in North Carolina projected that almost 2.2 million subprime foreclosures will occur over the next year and half, up from the group's original 1.1 million estimate in 2006.

The Valley CDC notes in its application for CPA funds that "the foreclosure crisis is nowhere near its end" and that the property-tax surcharge money sought would "greatly increase the likelihood of negotiating sustainable mortgage payments for these city homeowners."

The full application is available for review on the city's Web site. The Community Preservation Committee began reviewing the foreclosure relief fund proposal last week.

Target audience

Morris said it's not only city homeowners trapped in bad mortgages who are seeking help. More seniors are reporting problems with second mortgages, while other city residents are in arrears on their mortgages held by local banks because of job losses, the elimination of overtime in the workplace and the rising costs of food and utilities.

She said the Valley CDC would use the CPA funds to help struggling homeowners catch up on their mortgage payments or to restructure or modify loans so they are more affordable.

To qualify for the loans, a one-person household must have an income no greater than $45,000, while a family of four's household income cannot exceed $64,800, according to federal guidelines.

"We're hoping to prioritize using this (money) for people who can manage the loans going forward," she said.

The Valley CDC ramped up its foreclosure prevention efforts in Hampshire County with the May debut of the Western Massachusetts Foreclosure Prevention Center - one of 10 such centers created statewide to assist homeowners on the brink of losing their homes.

Morris said the Valley CDC spent a $10,000 grant it received for those efforts in less than three months and has been accessing a pool of dwindling money to continue its foreclosure prevention work.

In Northampton, foreclosures increased from three to seven in the first nine months of this year compared to the same period last year, according to data released by The Warren Group this week.

In Hampshire County, foreclosures spiked from 57 to 82, a 44 percent increase, during the same period. More than half of those foreclosures were in Ware, South Hadley and Belchertown. Statewide, they surged by 72 percent, with Springfield being one of the top four cities seeing foreclosures, with 521 properties on the auction block.

Statewide, foreclosure petitions are at the level they were before the state Legislature passed a so-called right to cure law earlier this year. That law gives homeowners a 90-day protection to get current on their mortgages before lenders can foreclose.

"This is a signal that foreclosure activity hasn't peaked," Timothy Warren, CEO of The Warren Group, said in a statement. "Even though foreclosure deeds have declined for four consecutive months, the increase in petition activity shows that there are borrowers who are struggling to save their homes even as the slumping housing market makes it harder for them to refinance into more workable loans or to sell their properties."

Although the spread of foreclosures is unlikely to result in vacant blocks of homes in Northampton, the Valley CDC notes that scattered vacancies would be undesirable and in conflict with the city's goals of enhancing neighborhoods and housing, according to its CPA project application.

Dan Crowley can be reached at dcrowley@gazettenet.com.