Many choosing convenient route, but financial responsibility is key
by Gloria Irwin

The Akron Beacon Journal

Twenty-seven-year-old Tiffany Herbert is about to become a homeowner — and it will cost her only about $800 or so.
A first-time buyer, she’s paying $64,000 for a two-bedroom home in the Goodyear Heights neigborhood of Akron.

She’s not making any down payment.

The seller is paying most of the closing costs.

The small amount that Herbert is paying up front will go toward the remaining closing costs and a year’s worth of homeowner’s insurance.

She’s getting a 30-year, fixed-rate mortgage at 6 percent. Her monthly payment will be about $435, plus property taxes and insurance.

That amount includes $51 for private mortgage insurance, which traditionally is charged to buyers who have less than a 20 percent down payment.

Had she been willing to pay a higher interest rate, Herbert could have opted to have the lender pay the PMI instead.

Buying now rather than waiting years to save a down payment makes sense to Herbert, an accountant for a tile company.

“I don’t want to waste my money on rent,” she said.

Buyers like Herbert are becoming increasingly common.

Based on a national survey, the National Association of Realtors estimated 42 percent of first-time home buyers last year didn’t make any down payment. Even more surprisingly, 13 percent of repeat buyers — people who had previously owned a home — made no down payment.

No local statistics

Local statistics are not available, but lenders here agree that no-down-payment mortgages have exploded recently.

Mary Schoenfeld, vice president and manager of Broadview Mortgage Co. in Copley Township, estimates that fully half of her customers now do not make any down payment.

“It’s what the consumer wants, and that’s how they’re buying houses,” Schoenfeld said.

Consumers don’t have to settle for buying inexpensive homes either. Mortgage giant Fannie Mae, which purchases mortgages and resells them to investors, caps loan amounts at $359,650 for a single-family home.

The concept of buying a home with no down payment is so new, no solid studies have been done on whether borrowers are more likely to end up in financial trouble.

With no down payment, buyers are financing the full purchase price. They won’t have equity to fall back on in case they lose a job, get divorced or have an unexpected medical problem.

Buying a house without a down payment was unheard of until recently. Walter Molony of the Realtors association said his group never asked about no-down-payment mortgages until 2003 “because they just weren’t available. It just was not an issue.”

That all began to change in the late ’90s because of improved credit scoring programs. Lenders increasingly found that credit scores, which measure how a consumer handles debt, were a better way of determining a borrower’s credit worthiness. Previously, lenders looked more at income levels, ratio of debt to incomeand an applicant’s assets.

FannieMae and Freddie Mac — the private mortgage companies created by Congress to make sure mortgage money is readily available to home buyers — got the ball rolling in 2001 with products designed to cover down payment costs.

Most local banks and mortgage companies now offer conventional no-down-payment loans, although many savings banks do not.

With interest rates remaining low and a government policy promoting homeownership, more and more consumers are jumping into real estate.

Whether consumers ultimately will be helped or hurt, though, depends on how they handle the financial responsibility of homeownership.

“I think in balance it’s a good thing that we have more homeowners,” says Mary Morstadt, senior vice president and specialty lending manager for National City Mortgage.

“If we can get someone in a home sooner, they’re building equity so they’re starting to create wealth,” she said. “Owning a home is typically the best way for an individual or family to build wealth.”

Brian R. Nichols, co-owner of Chervenic Mortgage Group LLC in Stow, worries about the impact on consumers.

“Look at our foreclosure rate. It’s insane,” he said. “It’s partially the lenders’ fault.”

A recent report found that foreclosure filings remain at record highs in Summit and several surrounding counties. But the Policy Matters Ohio report didn’t examine the circumstances that led to the foreclosures.

Fannie Mae has the most experience with no down payment loans. One manager said borrowers appear to be keeping up with payments.

“I wouldn’t say they’re defaulting more frequently,” said Uma Meale, senior product manager.

Risk of defaulting

Lenders traditionally believed that the risk of defaulting — or not paying — on a mortgage was directly tied to how much money the consumer had in the house. A borrower with a 20 percent stake was presumed to be less likely to lose the house through foreclosure.

“From a lender’s perspective,” said Jan Pynappel, national product mortgage manager for Cleveland-based KeyCorp, “the less money that customer puts down, the more risk that a lender takes.”

Using new computerized underwriting programs, lenders have found they could ease some of the down payment and credit standards without significantly increasing their loan risks.

Now, even customers who have missed some payments usually can qualify for some kind of mortgage.

“It’s been a long time since I’ve seen a loan turned down,” Nichols said.

Borrowers do pay for the looser lending terms, though. Depending on their individual situation, they’ll be charged a slightly higher interest rate or be required to pay more points to compensate for the increased riskiness of their loan.

Tacking on an extra half-percentage point, though, when interest rates hover at 40-year lows leaves borrowers with still-affordable monthly payments.

Financial counseling

At National City, borrowers often are required to go through financial counseling so they have a better understanding of budgeting, Morstadt said.

Schoenfeld, at Broadview Mortgage, said she often requires borrowers to have some savings on hand.

For the past two months, federal banking regulators have been cautioning lenders about the explosive rise in risky mortgage loans.

Regulators from the Federal Reserve to the Office of the Comptroller of the Currency worry about the surge in no-money-down mortgages, interest-only loans andlow-document loans that require no proof of a person’s income.

So far, though, there’s been little sign that lenders are slowing.

With national home sales seemingly headed for yet another record year, brokers and loan originators are under pressure to find ways to qualify buyers.

Schoenfeld at Broadview Mortgage said customers often say they’ve gotten loan approval elsewhere. It may be at a higher interest rate, but some borrowers are willing to pay more to be able to get into the house they want.

“We all make money on these deals,” said Nichols at Chervenic Mortgage. “If people don’t have a down payment, we don’t even blink.”

Generally, brokers don’t pay a penalty if borrowers later default. (One exception is the Federal Housing Administration, which requires lenders stay within a certain percentage of defaults.)

Shopping for mortgage

A few days ago, Nichols prepared the mortgage for Herbert, the accountant. She shopped around and called several other brokers before selecting Chervenic Mortgage.

Herbert, with a degree in finance, is well aware of the responsibility she’s taking on.

“It’s very exciting, but very frightening,” she said.

She has student loans to repay from her undergraduate and graduate years in Florida and some credit card debt. She said she has started “a small retirement plan.”

She hopes to close on the house in mid-August, and is looking forward to having “something of my own” after several years of living with her family.

She intends to avoid the pitfalls of piling up too much debt. “I know what to do. It’s just always hard doing it.”

WKYC.com

COLUMBUS, Ohio (AP) — A nonprofit economic policy research organization says a proposed Ohio Constitutional amendment to limit government spending and its ability to raise taxes includes a supremacy clause allowing it to prevail over everything else.

In a report out today, Policy Matters Ohio says the provision says it trumps all other sections of the Ohio Constitution.

A spokesman for backers of the amendment, Gene Pierce, says the intent of the strong language is to avoid constitutional clashes that could delay implementation.

But Dale Butland, a spokesman for the opposing Coalition for Ohio’s Future, says the supremacy clause would have major consequences, particularly for Ohio schools.

He says it would trump the provision in the Ohio Constitution which says the state has the obligation to provide a thorough and efficient education.

Related:
Flawed by Design: A Review of the Proposed Tax and Expenditure Limitation Amendment

Columbus Dispatch

by Jim Siegel

The proposed constitutional amendment limiting government spending is so vaguely worded that it could lead to years of legal battles, a nonprofit research group wrote in a study released today.

The amendment, pushed by a group led by Secretary of State J. Kenneth Blackwell, limits spending growth and says political subdivisions are not required to fulfill state imposed mandates unless the state provides sufficient funds.

“The main headline for this proposal thus far has been the spending cap,” said Jon Honeck, a research analyst for Policy Matters Ohio. “But I think this clause about mandates is so wide open, it just would invite all sorts of litigation to get it sorted out.”

In a 15-page report called “Flawed by Design,” Honeck describes what he thinks are a number of problems with the amendment that could lead to potential pitfalls if the issue makes the ballot and is passed by voters.

One of the biggest concerns, he said, is the mandates provision. Schools, for example, have argued for years the state does not provide enough funding for things such as testing.

“The state testing and all that, could an individual school district just decide it s going to opt out? It could try,” Honeck said. “Then you’re left with this weird patchwork of regulations.”

But Gene Pierce, spokesman for Citizens for Tax Reform, which is collecting signatures to get the issue on the ballot, said Policy Matters Ohio is just grasping at straws.

“I think the intent of that is pretty clear,” he said. “There will be litigation only if the state
legislature chooses to ignore the vote of the people.”

Gongwer News Service

Opponents hope they have identified at least one fatal flaw in a proposed constitutional state spending limit backed by Secretary of State J. Kenneth Blackwell, but a Citizens for Tax Reform spokesman defended the plan Tuesday against the latest critique.

The Policy Matters Ohio study of the tax expenditure limit (TEL) being pushed for the Nov. 8 ballot cites several potential problems with the proposal, including its possible impact on the Bureau of Workers’ Compensation fund, motor fuel taxes, lottery proceeds and local government funding.

The BWC implications – that employer payments would be subjected to year-end unencumbered funds transfers mandated in the constitution – could be especially onerous for TEL backers given the unfolding investment scandal and ensuing media scrutiny
enveloping the bureau. However, CTR spokesman Gene Pierce dismissed the Policy Matters warnings as “grasping for straws.”

“Our law says it covers taxes, licenses fees and sales. It doesn’t cover the BWC because those are premiums,” Mr. Pierce said. “They should read before they scream.”

Policy Matters Research Analyst Jon Honeck, the study’s author, said the language cited by Mr. Pierce is in a separate section describing what would be subject to the spending cap. Additionally, state and federal case law could point to BWC premiums being considered a tax or fee, he said.

Either way, the language at question is among several potential flaws in the proposed constitutional amendment that are open to different interpretations, will likely be decided in the courts and make its adoption a bad idea for state and local governments, Mr. Honeck said. “It’s an issue that would have to be litigated like many others in this proposal.”

Given its recent status as a lightning rod for political rhetoric and media attention, the BWC tie-in could prove to be irresistible to opponents in a ballot campaign should the issue make it that far. (Some of Mr. Blackwell’s fellow Republicans have been privately pushing to alter the proposal and delay it until 2006. See Gongwer Ohio Report, July 22, 2005.)

“Certainly, we’ll point to that, but we’ll point to a lot of these things,” said Dale Butland, spokesman for the Coalition for Ohio’s Future, a group of several dozen government program advocacy organizations in opposition to the TEL.

“It’s indicative of the sloppiness with which this thing was written,” Mr. Butland said. “There may be a host of other unintended consequences that voters will take into account if this thing is on the ballot.

The coalition has already attacked the plan on the basis of its potential impacts to essential services and higher education and its likely negative effect on government programs and budget management. The group has pointed to problems that have surfaced over the years with a similar state constitutional amendment passed by Colorado voters, but claims the Blackwell model goes even further in superseding current state and local government oversight.

Mr. Honeck said his group is not an official member of the coalition although he acknowledged, “We are in touch with those folks.”

Asked if CRT was leery of attack ads highlighting the BWC claims, Mr. Pierce said Mr. Blackwell testified against the mid-1990s legislation that loosened the BWC’s investment guidelines, thus resulting in the ill-conceived coin fund and other questionable investments that have come to light in recent months.

“There should be no doubt about Ken’s position on workers’ comp,” Mr. Pierce said. In regards to the amendment’s potential impacts to the motor fuel tax, however, he said: “I’m not sure there’s a problem with that one” given the gas tax rate. “I’m sure voters and taxpayers would appreciate more attention” to gas taxes, he said.

Mr. Honeck notes in the Policy Matters Ohio study that many of the plan’s flaws as researchers see it trace to the fact that it would supersede other constitutional edicts.

“The supremacy clause was not present in the two earlier versions of the amendment. The full implications of this sweeping provision cannot be known in advance,” the study states. “Potential conflicts exist with constitutional sections that limit the uses of workers’
compensation funds and motor fuel taxes, and with the home rule power of charter municipalities.”

The study also notes:

–The TEL imposes an overall cap on state spending and a separate spending cap for each local government that applies not just to the expenditure of tax revenue, but also to revenues raised from certain voluntary transactions such as lottery ticket sales.

–Significant portions of state four-year university spending may be subject to the aggregate state spending cap, including tuition, fees, and sales of tickets to sports and entertainment events.

–The TEL’s requirement that the state pay for mandates on political subdivisions fails to define the term “mandate,” thus opening the section up to litigation.

–The tax refund mechanism would pool revenue from many different taxes and fees and will give it to individuals who paid the income tax.

–The TEL does not specify how to implement the spending cap formula in school districts and other taxing districts that cross political boundaries.

Since NAFTA, rising trade deficit cost about 50,000 Ohio jobs, a million in U.S.;

New study ranks Ohio fifth in number, percent of jobs lost to rising trade deficit with Canada and Mexico

Since the North American Free Trade Agreement (NAFTA) took effect, the rising trade deficit with Canada and Mexico displaced production supporting over a million jobs in the United States and nearly 50,000 in Ohio. This and other information is revealed in A Million Lessons from NAFTA, by Robert Scott and David Ratner, just published by the Economic Policy Institute and released here by Policy Matters Ohio.

Ohio ranked fifth among all states in number of jobs and job opportunities lost due to the rising trade deficit with Canada and Mexico since passage of NAFTA, with 49,886 positions lost. States with the largest job such displacement from 1993 to 2004 were California (-123,995), Texas (-72,257), Michigan (-63,148), New York (-51,582), Ohio (-49,886), Illinois (-47,701), Pennsylvania (-44,173), Florida (-39,987), Indiana (-35,157), and North Carolina (-34,150).

Ohio also ranked fifth in percent of jobs lost, with nearly one percent of the state’s employment (.92 percent) lost. Other states on this list were Michigan (-1.44%), Indiana (-1.19%), Mississippi (-1.03%), Tennessee (-0.94%), Ohio (-0.92%), Rhode Island (-0.91%), Wisconsin (-0.90%), Arkansas (-0.89%), North Carolina (-0.89%), and New Hampshire (-0.87%).

Congress is preparing to vote this week on the Central American Free Trade Agreement (CAFTA). Proponents of this expansion, which would erase tariffs between participating nations, claim the agreement will create new jobs in the U.S., Central America and the Dominican Republic.

The U.S. experienced a rapid acceleration in its trade deficit after NAFTA took effect in 1994. Despite helping the country gain one million new jobs, NAFTA was responsible for two million jobs being displaced from the U.S., according to the study. Since the beginning of the 2001 recession, 2.8 million U.S. manufacturing jobs and 161,500 Ohio manufacturing jobs have been lost. Growing trade deficits are responsible for 34 to 58 percent of this decline, with all 50 states and the District of Columbia being affected.

“Workers have good reason to be concerned about another NAFTA-type trade agreement,” said study author, Economic Policy Institute economist Robert Scott. “The failure of NAFTA to create jobs casts serious doubt on similar claims being made for CAFTA.”

Read The Full Report from The Economic Policy institute

The Economic Policy Institute is an independent research institute that studies the impact of economic policies on working people in the United States and around the world. 

The Hannah Report

A new analysis by Policy Matters Ohio found that the proposed tax and expenditure limitation (TEL) for which signatures are currently being gathered will radically change the way government operates, has many ambiguous provisions, and will result in substantial litigation.

The proposal, spearheaded by Secretary of State Ken Blackwell’s Citizens for Tax Reform, will limit spending growth for the state and its subdivisions including local government, school districts and other local taxing districts. The proposal contains a supremacy clause, so that it prevails over other sections of the Constitution.

“Ohio voters will not know exactly what they are getting if they approve this amendment,” said Policy Matters research analyst and report author Jon Honeck, “but they can be assured that the amendment will override any other section of the Constitution in case of conflict.”

Findings of the report include:

* The TEL imposes an overall spending cap on state spending and a separate spending cap for each local government. The spending cap applies not just to tax revenue, but also to revenues raised from certain voluntary transactions, such as lottery ticket sales.

* Large portions of public university spending may be subject to the spending cap, including tuition, fees, and sales of tickets to sports and entertainment events.

* The TEL contains a supremacy clause that ensures that it will prevail in case of conflict with any other constitutional section. The mandatory year-end collection of unencumbered funds potentially conflicts with constitutional sections that restrict use of fuel taxes and workers’ compensation funds.

* The requirement that the state pay for mandates on subdivisions fails to define “mandate.” This is an invitation to litigation. If given an expansive interpretation by the courts, this provision will overturn the established relationship between the state and its subdivisions. Political subdivisions may be able to object to state laws passed in order to comply with federal mandates.

* The mechanism to refund part of a budgetary surplus gives refunds based on state income tax payments, even though taxes will have been collected from multiple sources. This will shift refunds disproportionately to higher-income taxpayers (who pay more income tax), when some of the revenue comes from sales and other taxes (paid disproportionately by middle- and low-income households).

* The amendment does not specify how to implement the spending cap formula in school districts and other taxing districts that cross political boundaries.

* The TEL makes no exception for the municipal home rule sections of the Ohio Constitution. Requiring voter approval before levying any tax conflicts with the authority of a charter municipality to levy a property tax for outside millage without voter approval.

* Both the state and local spending limits cover capital expenditures, which have previously been viewed as long-term investments. Even if voters have previously authorized bonds through local levies or state initiatives, the limit will apply.

* When it is necessary to exceed the cap, the mandatory referendum will delay the state budget by at least three months, giving a new Legislature just three months to produce a budget. This restricts public input into the budget process, and raises the likelihood that a budget will not be passed before the end of a fiscal year.

“The only certain thing about this amendment is that important concepts and procedures are unclear and will generate a flood of lawsuits before they are sorted out,” Honeck said. “The amendment is poorly conceived and would not serve the interests of Ohioans. It deserves to be rejected.”

This July 2005 report reviews the proposed tax and expenditure limitation (sometimes known as TEL or TABOR) being promoted by Secretary of State Ken Blackwell and Citizens for Tax Reform. Research Analyst Jon Honeck’s report finds that the amendment has ambiguous provisions and will result in substantial litigation. Also, the amendment’s tax refund mechanism only takes into account income tax payments and not payments for sales taxes and other state taxes. This will direct a disproportionate share of tax refunds to higher-income taxpayers.

Because the proposal contains a supremacy clause, it will prevail over other sections of the constitution. “Ohio voters will not know exactly what they are getting if they approve this amendment,” said Policy Matters Research Analyst and report author Jon Honeck, “but they can be assured that the amendment will override any other section of the constitution in case of conflict.”

The report finds that the amendment is likely to generate a flood of lawsuits, because of its poorly designed provisions.

Press Release

Executive Summary

Full Report

Read our November 2005 brief:
A Lesson for Ohio: Colorado Voters Decide to Suspend Spending Limits

Lord Corp. will add 30 jobs in $3.8M project
by Timothy R. Gaffney

Dayton Daily News

HARRISON TWP., Montgomery County | Gov. Bob Taft and other state and local officials
Wednesday morning helped Lord Corp. executives break ground on an expansion project that promises to add 30 jobs to its plant.

“Lord is exactly the kind of global manufacturing company that represents Ohio’s future,” said Taft, who said the recently signed tax reform bill he championed will encourage companies like the Cary, N.C.-based Lord to invest in Ohio.

“For Lord and other companies there will be no taxes on new equipment,” he said.
A manufacturer adding jobs is a rarity in Ohio, which has lost more than 179,000 jobs in four years, according to an analysis by Policy Matters Ohio.

Lord’s expansion “helps to stabilize our local employment and provides job opportunities into the future,” Montgomery County Commissioner Charles Curran said.

The state, county and township have been giving Lord incentives to invest here.

Most recently, the state extended a 2003 jobs creation tax credit agreement from five years to eight. Its value is estimated at $261,775, according to Maria Smith of the Ohio Department of Development.

The state also awarded an $18,000 grant for investment and training, which works on a reimbursement basis, and approved a $1.2 million loan, Smith said.

The township created an enterprise zone for the company and in 2000 approved a partial 10-year tax abatement in connection with an earlier expansion program.

Lord, an aerospace and defense supplier, expects to complete the $3.8 million expansion of its plant at 4644 Wadsworth Road by May 2006. It will add 38,000 square feet to its 90,000 square feet, said Will Hinkston, vice president of global operations.

Rick McNeel, Lord president and CEO, said the company expects to , boost employment to more than 215 over next three years, and sales should grow from $42 million to $59 million in 2010.

Daily Reporter

by Melanie McIntyre

Home foreclosures have a significant financial impact on local government, area residents
and retailers, but the problems could be minimized by reducing the incidence of poorly
written and/or fraudulent loans made in distressed neighborhoods, according to a recently
published report written by two Harvard University researchers.

“Collateral Damage: The Municipal Impact of Today’s Mortgage Foreclosure Boom,”
authored by William Agpar, senior scholar and Mark Duda, research fellow at the Joint
Center for Housing Studies at Harvard University, concluded that the foreclosure of a
single family home – especially one that leaves the home vacant and unsecured can
generate direct municipal costs in excess of $30,000 per property.

Typical expenses include loss of tax revenue, costs associated with managing the
foreclosure process, building inspections, increased policing, increased fire department
activity (due to arson and/or vandalism), demolition costs and increased demand for social
service programs.

“Left unchecked, the nationwide municipal cost of foreclosures could easily top the $1
billion mark – money that is annually being diverted from meeting other pressing urban
needs,” Agpar stated.

Foreclosures in lower income, high crime neighborhoods are more likely to generate such
hefty expenses, said Doug McCloud, president of the Columbus Board of Realtors, but in
undistressed neighborhoods a foreclosure goes relatively unnoticed, negating expenditures
for many of the services Agpar listed.

In stable neighborhoods foreclosure proceedings are preferable to boarded-up homes, he
said. Professional rehabbers often buy homes in foreclosure, bring them up to code and
either resell them or rent them, which provides affordable housing options.

Foreclosures in unfinished subdivisions can have negative and positive consequences,
said Joe Evans owner/agent at Keller Williams Greater Columbus Realty and chairman of
the Columbus Board of Realtors’ Builder/Realtor Alliance Committee.

Potential homebuyers may be reluctant to move into a neighborhood with numerous
foreclosed upon, empty homes, but developers are so anxious to fill the subdivision’s new
homes that asking prices are lowered and people who were not able to afford a house
there can then do so, he stated.

If the neighborhood stabilizes over the next several years, buyers who purchased their
houses at lower prices might be able to sell them for a generous profit.

“Foreclosures are on the rise across the country – especially foreclosures on higher-risk
nonprime mortgages,” Agpar stated. “Although non-prime lending has enabled millions to
become homeowners, higher-risk lending also sparked substantial increases in
foreclosures.”

Ohio is no exception.

According to Policy Matters Ohio, a Cleveland-based research group, foreclosures
continued to rise in Ohio in 2004.

After analyzing data from the Ohio Supreme Court, which updates previous reports on the
subject, PMO revealed that Ohio’s foreclosure filings rose 3 percent for a second
consecutive year, after years of larger increases, reported Hannah News Service.

Growth in foreclosures has leveled off, but at a high level: in 53 Ohio counties, the number
of foreclosure filings has at least quadrupled over the past decade.

Fifty of the state’s 88 counties saw increases in foreclosure filings in 2004.

Foreclosures in Franklin County totaled 5,862 last year, according to records in The Daily
Reporter’s databases of court proceedings.

Overextending credit to high-risk borrowers leads to perverse market effects, as “a race to
the bottom ensues when lenders lower their underwriting standards to reach ever less
qualified borrowers in ever more vulnerable neighborhoods,” the Harvard researchers
wrote.

“As a result, lenders willing to underprice their products at origination gain marketshare
while leaving others to pick up a portion of the costs generated when loans go bad,” they
stated.

Foreclosure also can prove devastating to retailers, as “vacant and boarded-up homes
reduce the willingness of customers to shop at nearby stores and limits the ability of
nearby employers to attract qualified employees,” Agpar said.

The effects of foreclosure further extend into other neighborhood-based entities, he
continued, such as houses of worship, parks and recreation community centers.

Municipalities must take decisive, proactive steps to reduce foreclosures, the Harvard
researchers said.

Government, the mortgage industry and community leaders should work together to
support grassroots efforts to help homeowners facing foreclosure and reduce the
incidence of poorly written and/or fraudulent loans made in distressed neighborhoods.

Additionally, they noted, industry participants should be encouraged to pay their fair share
of foreclosure-related costs.

The report was funded by the Minneapolis-based Homeownership Preservation
Foundation, which assists homeowners nationwide in overcoming obstacles that threaten
their ability to retain ownership of their homes.

 

Dayton Daily News

The Dayton area is represented by two powerful state lawmakers, House Speaker Jon Husted and Sen. Jeff Jacobson, who’s No. 2 in the Senate. One day they’ll leave office, and be asked what they did for their community.

Given the home mortgage foreclosure rate in Montgomery County – which is among the highest in the nation – you’d think predatory lending would be somewhere on their radar. It has not been.

Losing one’s home under any circumstances is a devastating, long-lasting personal and financial crisis. But it’s especially so when abusive lending practices are to blame. Victims of these high-cost loans typically are older, poorer and less educated. They almost never recover because they are permanently stripped of the little bit of wealth they’ve
been able to accumulate. Most don’t get a second chance.

Sen. Jacobson and Speaker Husted know that stubbornly high foreclosure rates in Montgomery County and many other parts of Ohio have risen to more than twice the national average. (For data click here)

And they know the numbers are so compelling that they can’t be dismissed as isolated cases of people failing to manage their money. In fact, foreclosures have become a middle-class phenomenon, affecting the stability of this entire community.

Last week, the Miami Valley Fair Housing Center, a consumer advocacy group in Dayton, directed public attention to a local foreclosure case. It involves an $84,500 mortgage loan.

According to the advocates, the borrower signed the papers after he was admitted to the psychiatric unit of Miami Valley Hospital. The loan carried an interest rate of more than 12 percent and the borrower was sold a life insurance policy that cost $6,750 and makes no economic sense. The broker took a commission of $6,400.

Consumers have certain responsibilities to not be taken in, but the state regulates mortgage brokers and what they can sell precisely because communities have an interest in making sure that vulnerable people aren’t ripped off.

How often do abusive mortgage lending practices contribute to foreclosures in Ohio? No one knows. Why don’t we know? Because Gov. Bob Taft and state lawmakers aren’t interested in finding out much less taking any meaningful steps to protect consumers.

Sen. Jacobson was a primary architect of Ohio’s law designed to protect lenders with toothless, virtually meaningless state regulation. Speaker Husted has shown little interest in the problem or the gaps in Ohio’s rules.

Meanwhile, the foreclosures keep rolling. For two years now, Montgomery County has led the nation in mortgage foreclosure filings per capita.

Critics say Ohio’s Republican-dominated state government is built on the demand of “pay to play,” meaning campaign contributions drive the laws and policies that are adopted. With financial services and mortgage lending, the system is more
aptly described as “pay to ignore.”

Politicians from both political parties, including Sen. Jacobson and Speaker Husted, accept contributions from the lending industry, then turn their backs on Ohioans losing homes in record numbers. That’s a scandal, and the Dayton region is an epicenter of the trend.

Speaker Husted and Sen. Jacobson should not be allowed to keep turning their heads away from what’s happening right here in their hometown.