Foreclosures, pricey mortgages stress Richland County neighborhoods

By LINDA MARTZ
News Journal

MANSFIELD -- Keith Price was feeling frustrated and stressed Wednesday when he stopped in for free mortgage counseling offered by the Richland County Foreclosure Prevention Committee.

Since he signed papers for the loan on his Mansfield home in 1997, his mortgage had been sold four times, the interest rate kept changing and unexpected fees seemed to keep piling up, he said.

"I pay like 14 percent (interest). That's ridiculous. It was up to 17 percent at one point," he said.

Price said almost nothing has been paid on the principal amount, despite 10 years of payments, and he's looking for a sensible way out of the home loan.

Other residents already have lost homes because of mortgage loans with unaffordable terms, "overbuying" or a financial crisis triggered by a job loss.

Nearly 150 people showed up for Wednesday's daylong workshop at the Mid-Ohio Conference Center. Real estate agents, appraisers, local lenders, social workers and homeowners who participated seemed familiar with the stresses the foreclosure crisis has placed on north central Ohio.

The number of homes sold under foreclosure in Richland County jumped from 341 in 2002 to 513 last year, not counting some homes under Veterans Administration or Federal Housing Administration loans.

"We know we're going to exceed that in 2007, unfortunately," said Don Mitchell, Mansfield Fair Housing director.

Local officials began seeing problems in the early part of the decade related to "flipping" of properties by out-of-town lenders who offered mortgages under terms many borrowers couldn't pay off.

The problem escalated in recent years as Wall Street moved aggressively into investing in home loans. Out-of-town companies began marketing loans to customers who didn't have good credit scores, and loans sometimes totaled more than the homes actually were worth, said Cindy Flaherty of the Ohio Housing Financing Agency.

"The criteria for making loans basically evaporated," she said, as national lenders chased customers.

Flaherty said 5.22 percent of all Ohio mortgages are seriously delinquent or under foreclosure, and 22.2 percent of those cases involve homes with adjustable-rate mortgages.

Ohio has been first in the nation in foreclosures in recent years.

"We are no longer, not because we're doing better but because other states are doing worse," state Treasurer Richard Cordray said. "It has become a scourge of communities."

Over the last five years, foreclosure properties in his area had appraised values totaling $154 million but sold for only $101 million in an increasingly depressed market, Mitchell said.

"That money is lost. We'll never see that again," he said.

The loss in tax base has hurt school districts and other entities dependent on property tax collection, Mitchell said.

"Studies have shown there's an increase in crimes in vacant and abandoned neighborhoods," Michelle Pearson, of the state treasurer's office, said.

"Many times that house is vandalized. The copper and aluminum is stripped," Mitchell said. "That is a devastating situation for those that are trying to sell that property."

Business leaders may think twice about starting a new venture in the community where they see abandoned homes, he said.

Even homeowners who faithfully continue to make payments get hurt, said Bradley Payne of the U.S. Department of Housing and Urban Development.

"If you're within 150 feet of a foreclosed property, you can expect to lose about 10 percent of your property value. On a $70,000 home, you lose $7,000." he said.

Payne noted many problem mortgages were aggressively targeted toward African-American families. Forty percent of black homeowners pay interest rates 3 percent higher than the average, he said.

While Ohio enacted a predatory lending law earlier this year, the state can expect continued problems with foreclosure over the next couple of years, as recently signed adjustable-rate loans reset at higher interest, Cordray said.

Homeowners in states such as California, which saw rapid appreciation in home values, at least have an option of getting out by selling short -- at a lower price than they would have hoped, Flaherty said.

But in Ohio, where values haven't risen sharply, many borrowers have negative equity, meaning they owe more than they could possibly recover by putting their house on the market, she said.

"They can't sell their way out of the problem," Flaherty said.

One real estate agent at Wednesday's workshop said one-third to one-half of the properties on her list during the past year were foreclosed on before she could find a seller.

Despite lenders' promises to work with agents and sellers so they can regain a percentage of what they lent, they often don't follow up, the agent said. She has seen lenders refuse offers of $104,000, then watch the house sell at sheriff's sale for $80,000.

"The loss mitigation department swears up front they are happy to work with you but they're not," she said to the applause of other frustrated real estate agents.

Despite the national crisis, Cordray said, some huge mortgage lenders "are living in fantasyland. They are not recognizing the scope of the problem. The companies keep telling us they don't want to own millions of pieces of property all around the country. But they're not acting on it yet."

Hazel E. Blankenship, director of Ohio Heartland Community Action Project in Marion, said borrowers trying to find a way out of their problems hit a bureaucratic wall. Where before they might have a face-to-face meeting with a local lender, "now you're dealing with a 1-800 number somewhere," she said.

She believes financial counseling for first-time homeowners should be a priority so they can be certain they can afford the homes they want to buy. She remembers one client who got in so far over his head, with the need for major repairs and other unanticipated problems, he never made one payment.

"It is the American dream that everyone should own a home," Mitchell said. But for some property owners, "that dream is starting to become a nightmare."

 

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