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| Homeowner saved: Sylvia Figueroa nearly lost her Cleveland-area home to foreclosure, but the county and state stepped in with
emergency funds. David Ahntholz/Special to the Christian Science Monitor |
Ohio leads fight to stop foreclosures
Its formula: loan counselors, direct aid, and tear-downs of vacant homes beyond hope.
By Ron Scherer | Staff writer of The Christian Science Monitorfrom the December 12, 2007 edition
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Warrensville Heights, Ohio - Sylvia Figueroa's house is right out of a Norman Rockwell painting: the basketball rim on the garage door, an American flag flying from the front porch, looking out on the tree-lined street.
But she came dangerously close to losing her home to foreclosure when she fell $6,000 behind on her mortgage after her divorce. Before the bank could dispossess Ms. Figueroa and her two children, she went to the Neighborhood Housing Services of Greater Cleveland, which cobbled together state and county funds that will allow her to bring her mortgage up to date. "I was surprised," she says, grinning. "I thought I was going to be denied."
"We have a responsibility to deal with this unfolding crisis and we are looking for ways to do that," says Ohio Gov. Ted Strickland (D) in an interview.
However, the Ohio experience also shows the limits of what can be done. When Governor Strickland tried to get mortgage-service companies to sign a voluntary compact committing themselves, among other things, to giving a six-month notice before resetting mortgage rates, the companies refused. They say some elements of the compact probably violate Ohio truth-in-lending laws, credit-reporting laws, and a recently passed predatory lending legislation. Now the governor says he will seek to make the changes through regulations or legislation.
"We are not just going to sit back and let this unfold without doing everything in our power to ameliorate the pain and suffering," he says.
The scope of the work is daunting. While foreclosures are a national problem, they are three times the national rate in Ohio. Last year, the state found that foreclosures in 12 of the 13 largest Ohio counties increased by 25 percent over 2005 as an estimated 80,000 homes were foreclosed. The foreclosure wave is likely to grow because in the next year, $14 billion in subprime loans will reset.
Ohio's crisis was brought on by an economic downturn, fraud, and predatory loans. "It was the Wild West of lending," says Jim Rokakis, treasurer of Cuyahoga County, pulling out a chart detailing how one mortgage company, Argent, now a subsidiary of Citigroup, loaned $300 million more than the 8,000 properties were worth. "Maybe 40 percent of them or more are in foreclosure," he adds. "But, we've moved on to the next phase."
Residents facing foreclosure are encouraged to call 211 on their phones where county workers refer them to counseling centers. The county found $3 million in revenue it could use – half of it to provide loans, half of it to tear down abandoned houses. The county money can be used in conjunction with some state funds. This past April, the state established a loan program run by the Ohio Housing Finance Agency, expected to reach $500 million by the end of 2007. There is also a much smaller rescue fund of $1.5 million that supplies grants.
When a county resident calls for help, some may end up at the storefront offices where Figueroa got help. The center receives about 35 to 50 calls a day from homeowners looking for help.
"It's crisis management," explains Lou Tisler, executive director of Neighborhood Housing Services of Greater Cleveland. "If we have 100 people walk through the door, we probably have a success rate of 20 to 25 percent." Mr. Tisler, like other people involved in the crisis, view the rescue funds as "band-aids." For a homeowner who is two to three payments behind on a fixed-rate mortgage, the funds might help, he says. But "can we help the 150,000 people in Ohio whose mortgage will reset in the next eight to 12 months? Certainly not."
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