When Mark Wiseman started as head of Cuyahoga County's Foreclosure Prevention Program in late 2005, the county was at nearly 11 thousand foreclosures. Two years later, Cuyahoga County is set to hit 17 thousand foreclosures. Cuyahoga County leads the state in the number of foreclosures. So, Wiseman says, he's been following news of President George W. Bush's plan to help distressed homeowners carefully.
Mark Wiseman: It will help borrowers who have an adjustable rate mortgages that was written between January 1st, 2005 and June of this year and you have to be current in your mortgage, you can't have a 30 day or 60 day late in the last 12 months.
Mhari Saito: So how do you think it will impact what you all do here?
Mark Wiseman: I don't think it will help at all.
Mark Wiseman says too many Ohio homeowners seek out help when its too late and they're already behind on their mortgage payments. Under Bush's plan, only borrowers current on their subprime adjustable rate mortgages would be eligible for a freeze.
Mark Wiseman: Ninety-five percent of the people who come through are already in foreclosure or have missed a payment. So they're out. Unfortunately people don't seek help until they're really falling over the edge.
President Bush's plan was hammered out with the nation's top lenders. The White House says it could help as many as 1.2 M million borrowers across the country. Besides the rate freeze, lenders say they will help homeowners refinance into a private loan or get one backed by the Federal Housing Administration. Trouble in the $11.5 trillion mortgage market is driving the new policy. The Mortgage Bankers Association announced yesterday that the number of Americans late on their mortgage payments is at a 20-year high. Ohio is leading the pack. Doug Duncan is the MBA's Chief Economist.
Doug Duncan: There are less people there to buy houses and less people with the income available to buy houses and that almost always means price declines and quality declines in mortgages.
In a statement, the head of the Mortgage Bankers Association says Bush's plan will "help stem the rising tide of foreclosures." But MBA's Chief Economist Duncan concedes Ohio is different. Only around 30% of the state's foreclosures last quarter were from troubled adjustable rate mortgages. Ohio and Michigan lead the nation in the number of fixed rate prime loans in serious trouble.
Doug Duncan: Fixed rates are supposed to be the safest because the payments don't adjust once you're in the loan and prime indicates the best quality of borrowers. The fact that those states lead in prime fixed rate delinquency and foreclosure is to us a clear indicator that the problem is the underlying economy.
Since 2001, Ohio lost a quarter of all manufacturing jobs cut nationwide. Cleveland has lost nearly half its population since 1950. Ohio Treasurer Richard Cordray recognizes Ohio's economic challenges as part of the state's foreclosure problem. But he says the huge number of foreclosures is now having an economic impact on homeowners living nearby.
Richard Cordray: We're starting to see the foreclosure problem seep into areas where we haven't seen it before. People on fixed rate loans had not been suffering any particular foreclosure problems, but now that they're in neighborhoods where there are five or 10 or 15 boarded up houses they're starting to have a problem because their property values aren't holding up.
Earlier this year, Ohio Governor Ted Strickland asked 20 loan servicers to sign a compact to help troubled homeowners fix their loans. Lenders declined, saying that portions of the compact raised serious concerns. After the President announced his plan to help homeowners, Cordray says Ohio may relook at the compact.
Richard Cordray: We'll have to reassess of where we stand with the compact in light of this development and think about the efforts that are underway in Ohio.
Cordray says finding solutions are critical. The number of foreclosures in Ohio is expected to keep rising.