Weak Economy, Predatory Lending Lead to Foreclosure Leap

Dayton Daily News - June 24, 2005

Dayton Daily News

by By Cathy Mong, Shaheen Samavati

DAYTON | For the second year in a row, Montgomery County leads the state in the number of foreclosures per person.

According to Policy Matters Ohio, a Cleveland-based research organization, 4,002 foreclosures were filed in 2004 among the county’s 550,063 residents — that’s one filing per 137.4 people.

Cuyahoga County was second, with one filing per 138.6 people. The county with the lowest rate is Athens in southeast Ohio, with one filing per 526.6 people.

The report notes that the number of foreclosures has risen dramatically over the last decade everywhere in Ohio, with 81 of the state’s 88 counties reporting the number of filings at least doubling in that period. In 53 counties, the number of filings at least quadrupled.

Reasons cited for the continued high numbers of filings include the state’s weak economy, predatory lending and the growth of non-conforming loans, known as subprime lending. Subprime loans carry higher rates, fees and other costs than prime, or “A” rated, loans. In addition, subprime loans have default and foreclosure rates five to 10 times higher than those for “A” rated loans.

Filings in Montgomery County are at about the same level as last year, but overall have almost quadrupled since 1994.

It is starting to level off, but at a high level, said Zach Schiller, research director of Policy Matters Ohio.

“There’s no question this is a problem that’s been going on in Montgomery County and is continuing,” he said.

Denise Lee, spokeswoman for the Ohio Commerce Department, said the department is pleased to see a leveling off. “Certainly we have a lot of work to do,” she said, noting that their mission is to focus on reducing foreclosures.

“We do that by educating consumers. People can avoid problems if they go into a transaction cautiously,” she said.

A year ago, Policy Matters Ohio found that there was a 57 percent increase in properties put up for sale by county sheriffs statewide from 2001 to 2003. In that survey of sheriffs, a majority responded that predatory lending is the biggest single factor leading to foreclosures, Schiller said.

Predatory lending covers practices such as deceptive, high-cost loans with excessive interest rates, fees and penalties.

The county’s dubious standing comes as no surprise to Montgomery County Sheriff Dave Vore, whose 2004 figures for orders to sell property showed 5,014 because of mortgage arrears, and 398 for nonpayment of property taxes. That’s up from 3,469 foreclosures because of nonpayment of mortgages and 47 for tax arrears in 2003.

Vore said foreclosed property sold at auction brings less than market value and can bring down a neighborhood’s property values.

“It’s tragic,” he said. “All you have to do is look around and see abandoned houses, abandoned apartment buildings, creating a blight on the landscape.”

With the rise of foreclosures comes an increase in clients using the Consumer Credit Counseling Service of the Miami Valley.

“The worst thing you can do is hide your head in the sand and pretend there’s nothing you can do” to prevent foreclosure, said Bill Staler, director of the nonprofit, HUD-approved housing counseling agency.

“We urge you to communicate with your mortgage company or lender,” Staler said. “Most mortgage companies don’t want to take your house back. Most good lenders have programs and special services for people who are experiencing difficulty.”

Dan Foley, Montgomery County clerk of courts, has crunched several years worth of data that show an increase of more than 200 percent in the number of foreclosure filings the last five to six years.

“I think the reasons for the increase is job losses and part of it is predatory lending,” he said.

Foley said a map showing locations of foreclosures shows the northwest Dayton area around Salem Avenue as being “hit hard. How can we build communities where their ravaged property values go down? If makes people not feel good about their neighborhood.” He said the telephone help line could be very beneficial.

“We know you can’t save every foreclosure, but if there’s a way to call and learn how to repay or access an emergency loan for 30 days, then maybe we could do some good,” Foley said.

To see the state report on foreclosures, go to www.policymattersohio.org and click on “Foreclosure Growth in Ohio: A Brief Update.”

For a look at Montgomery County foreclosure statistics, go to www.clerk.co.montgomery.oh.us and click under “civil.” Open “sheriff foreclosures.”

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