Friday, June 15, 2007

Ohio still spinning in foreclosure fury
Despite slight improvement, state is No. 6 in delinquent loans, report shows

By Denise Trowbridge

The Columbus Dispatch

Troubles caused by subprime mortgage loans are still a sore spot in Ohio.

The state had 19.9 percent of its subprime adjustable-rate loans, the type typically made to borrowers with poor or no credit, go 90 days past due or into foreclosure during the first quarter of this year. That compared with 10.1 percent nationwide. About 2 percent of prime, fixed-rate mortgages were delinquent, almost triple the national average.

And even though late payments on many types of mortgage loans have declined slightly this year, Ohio ranked No. 1 in the nation in percentage of houses in foreclosure and No. 6 for delinquent loans, according to a recent survey by the Mortgage Bankers Association.

Job losses and slow economic growth, coupled with only modest gains in home prices, are part of the reason Ohio is experiencing more foreclosures and late payments than other states, said Richard DeKaser, chief economist with National City.

"The state hasn't recovered even a quarter of the jobs lost in the first four years of this decade," he said.

Those lost jobs have translated into low population growth, which has held down house prices.

"It's relevant because when house prices rise, people accumulate equity by just standing there, and if they get into trouble, they can avoid foreclosure by selling or refinancing," DeKaser said.

Predatory lending is another factor, he said. About half of the sheriff's offices in Ohio, which regulate pre-foreclosure sheriff's sales, cited predatory lending as the leading reason for foreclosure in their counties, according to Policy Matters Ohio, a nonprofit research group in Cleveland.

Other personal events also are pushing some homeowners over the edge.

"The No. 1 reason people miss their house payments is loss of a job, but sometimes it can be something as simple as a medical emergency that's created a series of medical bills, a family situation like a divorce, or just too much debt," said Kathy Virgallito of Consumer Credit Counseling Services in Columbus.

Rising interest rates on adjustable-rate mortgage loans, known as ARMs, also are crimping budgets.

"We're seeing a lot of people whose ARMs are adjusting up. If they're not prepared, it certainly takes a huge toll on their budget," Virgallito said.

"The typical solution is to downsize, sell your house and get into something less expensive, but people are stuck," she said. "They're not able to sell the home (quickly) and so they're becoming more and more delinquent."

Ohio isn't the only state having mortgage pains. Indiana and Michigan are in a similar situation. The three states account for 8.7 percent of mortgage loans in the country but 19.9 percent of loans in foreclosure and 15 percent of all loans that entered foreclosure during the first quarter of this year.

Late payments on all mortgages in Ohio fell to 5.87 percent in the first quarter, a 1.38 percentage point drop from the fourth quarter last year. The national average was 4.84 percent, down from 4.95 percent.