Foreclosures on the rise even in well-to-do areas, report says
Tuesday, March 27, 2007 3:27 AM
By Denise Trowbridge

THE COLUMBUS DISPATCH

Ohio's nation-leading home-foreclosure rate is starting to strike in some of its most affluent areas.

High-growth Delaware County posted the state's biggest increase last year in the number of residents facing foreclosure, jumping 49.7 percent when compared with 2005.

Central Ohio overall was hit particularly hard.

Pickaway and Franklin counties also had some of the state's fastest-growing foreclosure rates, with filings increasing 40.6 percent and 34.6 percent, respectively.

Foreclosures in other nearby counties, including Fairfield, Licking, and Madison, grew by an average of 23 percent, according to Policy Matters Ohio, which conducted the study.

The increase was attributed in part to a variety of lending practices, including lending to buyers on the economic fringe and pushing home buyers into bigger loans than they could afford.

"Usually, people fall behind on their mortgages because of a job loss, medical problems or a divorce," said Kathy Virgallito, of Consumer Credit Counseling in Columbus. "Now, we have a situation where the mortgage itself is the problem."

Despite the numbers, central Ohio's economy has been going "reasonably well, and there hasn't been any significant job loss," said Bill Lafayette, vice president of economic analysis with the Columbus Chamber.

Lafayette also sees problems on the lending front.

"The mortgage market has been really aggressive in the past few years, trying to get as many people into homeownership as possible," Lafayette said.

John Barron, director of economic development in Delaware County, says the numbers for his county are misleading.

"Our growth rate has been so steep that even if we have a little bump in the road it makes the percentage (increase) look large," he said.

Delaware County had 720 new foreclosure filings in 2006, up from 481 in 2005.

Overall, Ohio foreclosures increased 23.6 percent in 2006, the group said.

The state is no stranger to housing problems. Ohio has ranked No. 1 in the nation in foreclosures since 2004, according to the Mortgage Bankers Association. The state's foreclosure rate has quintupled since 1995.

About half of Ohio sheriff's offices, which regulate pre-foreclosure sheriff's sales, said predatory lending was the leading reason for foreclosure in their counties.

A lot of buyers on the fringe -- those with low incomes, bad credit or those who wouldn't qualify for a traditional, fixed-rate mortgage -- were pushed into creative financing.

Many of these buyers already had financial problems, and now that grace periods for adjustable-rate and interest-only loans taken out several years ago are ending, the higher monthly mortgage payments are pushing them over the edge, Virgallito said.

Consumer Credit Counseling saw a 112 percent increase in people with mortgage-related problems in 2006.

Many are stuck.

If they already have missed mortgage payments, banks may not be willing to refinance their mortgage, Virgallito said.

Some also can't refinance into a more-affordable loan because the value of their property didn't go up enough, Lafayette said.

Ohio home prices overall appreciated 2 percent last year, but in central Ohio many areas saw price declines, Lafayette said. Nationally, home prices went up 7.5 percent.

Borrowers in neighborhoods with price declines might owe more on their mortgage than their house is worth, making refinancing impossible.

The impact of Ohio's high foreclosure rate doesn't just hit those who lose their houses either, said Mike Van Buskirk, president of the Ohio Bankers' League.

"If you think this won't affect you, you're wrong," he said.

High foreclosure rates lower home values, because the market becomes flooded with underpriced houses. That makes it harder for people who are selling their homes for other reasons to get top dollar.

Each foreclosure in a neighborhood lowers the property value of nearby homes by about 1 percent, according to the Center for Responsible Lending.

And the number of homes falling into foreclosure appears to be going up.

Foreclosures are "expected to grow faster in the next two years," Gov. Ted Strickland said this month as he unveiled Ohio's Foreclosure Prevention Task Force. "This problem demands a comprehensive response."