AVOID FORECLOSURE

1. Contact your lender immediately if you have trouble making mortgage payments. Do not ignore letters from the lender.     2. Ask the lender if it's possible to arrange a plan to temporarily reduce or delay payments. This can be used if you lose a job but expect to be working again soon.     3. Refinance the loan to reduce monthly payments.     4. Sell the home.     5. Return the property to the lender. The deed-in-lieu of foreclosure option won't save your house, but it can improve chances of getting a loan in the future.     Sources: The U.S. Department of Housing and Urban Development, Enquirer research

LENDING FORUM

State Sen. Mark Mallory, D-Cincinnati, will host a forum Thursday on predatory lending, the practice of enticing borrowers into risky, high-interest rate loans that often strip a home's equity. The meeting will be at the downtown branch of the Public Library of Cincinnati & Hamilton County, 800 Vine St., third floor, from 7 p.m. to 8:30 p.m. For more information, call 614-466-5980.

        The number of foreclosures in Southwest Ohio for 2001 is far ahead of last year's pace — the sixth consecutive year filings have increased.

        Widespread layoffs during this year's recession are partly to blame for making the list of foreclosed homes offered up for auction every Thursday at the Hamilton County courthouse longer and the crowds of real estate speculators at the auction thicker.

        But the trend has lasted so long and affected so many homeowners that credit counselors and lenders say there are other important factors, too.

        With the wide variety of minimal down payment and home equity loans available, experts say many people have simply borrowed more than they can afford.

        “Anybody is at risk of foreclosure if they lose their job,” said Dot Christenson, executive director of Better Housing League of Greater Cincinnati. “But it's also too easy to get credit. When you miss a payment, you lose it all.”

        Through September, 2,234 foreclosure cases were filed at the Hamilton County Court of Common Pleas. If that pace continues, there will be a 7.5 percent increase over the 2,770 cases in 2000.

        Similar spikes can be found in Brown, Butler, Clermont and Warren counties, according to figures compiled by the Ohio Supreme Court.

        Foreclosures in the five-county region more than doubled from 2,293 in 1995 to 4,869 in 2000.

        Through the first nine months of 2001, there have been 3,901 foreclosures in the five counties — 6.8 percent ahead of last year's pace.

        The data provided by the Ohio Supreme Court, collected from monthly reports from each county, include all types of foreclosures, but residential ones make up about 95 percent of cases.

        Foreclosures have spiked because unemployment is on the rise and high-wage job openings are becoming scarce. Those who lose jobs rarely have enough savings to cover monthly house payments.

        Indeed, a report released Monday by the Mortgage Bankers Association of America offers the latest evidence that Americans are having difficulty paying bills on time. The report showed 4.87 percent of all loans had payments overdue at least 30 days, the nation's highest delinquency rate in 10 years.

Shifting patterns

        While the slumping economy shoulders some blame, many say the six years of rising foreclosures — during a time when Cincinnati and the rest of America enjoyed the best of times — represents a fundamental shift in lending patterns.

        Some banks are willing to take more risk on a bet that the sheer number of loans will create profits that offset bad loans. Private mortgage insurance provides banks some protection against loans that require minimal down payments.

        The more liberal lending practices helped lift the nation's home ownership rate to 66.2 percent, the highest level in more than a century.

        But it came with a price — rising numbers of foreclosures and past-due loans.

        “We can hypothesize that has caused some increased delinquencies,” said Phil Colling, an economist with the Mortgage Bankers Association. “It would make sense.”

        Another major factor: the rapid increase of high-interest, home equity loans.

        Many use these loans to save money by paying off higher-interest credit card, medical bills or other debt.

        “They get a second mortgage to pay off credit card debt,” said Mary Hurlburt, education director for the nonprofit Consumer Credit Counseling Service of Greater Cincinnati. “These people don't change their lifestyles and suddenly their house is on the line.”

The subprime problem

        Other consumer counselors see a more sinister trend with the rise of “subprime” loans that are often marketed to low- and moderate-income households mired in debt.

        These high-interest loans typically have prepayment penalties or balloon payments that catch unsophisticated consumers off guard.

        A University of Dayton study released in October tied a rapid increase in Dayton-area foreclosures to subprime loans, or loans charging higher-than-prime interest.

        Montgomery County foreclosures jumped 139 percent from 1994 to 2000. Of those foreclosures, subprime lenders were responsible for an increasingly large share each year.

        The study showed subprime lenders originated 19 percent of all Montgomery County foreclosed loans in 1994. That share jumped to 48 percent in 1999 before dropping to 41 percent in 2000.

        Though no similar study has been conducted on Hamilton County foreclosures, credit counselors and fair housing advocates say predatory loans have taken their toll.

        “It's the good old American way,” Ms. Christenson said. “They take the money and run.”

Avoiding foreclosure

        Yet lenders don't want to foreclose loans. It costs too much to pay fees associated with a foreclosure, manage a property and sell it. Vacant property often loses value and becomes a high-crime risk, increasing potential liability for the banks.

        Because of that, many banks will go a long way to avoid a foreclosure.

        “The climate has changed,” said Deb Oakley, senior vice president of default management for National City Mortgage, the nation's eighth-largest mortgage lender. “The role of the so-called collector is to be a counselor.”

        Ms. Oakley's job is to talk to homeowners and figure out a way to ward off foreclosure. That can include negotiating a payment plan to ensure that owners pay past debt.

        If a person gets a new job but doesn't start for a few months, Ms. Oakley said lenders will sometimes agree to delay payments until the homeowner starts earning money again.

        “The goal is to keep the borrower in the house,” she said. “Having a performing loan is much more valuable than having a nonperforming loan.”

Home foreclosures steadily increasing
Chiquita creditors likely to sell
LTV: $250 million won't save company
More planes operate on time
Don't write off Enron as dead yet, some say
KeyCorp wants bigger slice of ATM pie
Industry notes: Banking
Business Digest
Morning Memo
Tristate Summary
What's the Buzz?