Losing the American dream

Editors note: The actual name of the foreclosure victim who resides in Auglaize County was withheld at her request for privacy reasons.

Janet and her husband raised their children, celebrated family milestones and built memories in their cozy, three-bedroom home.

Now it's someone else's.

Like thousands of Ohioans last year, Janet lost her house to foreclosure when she no longer could afford her high-interest mortgage payments. Health reasons forced the 64-year-old widow to quit her job at a local hospital, and when money became tight, she refinanced her home.

The flexible loan she obtained started at 8.5 percent interest, but two years later jumped to 11.50 with a lifetime maximum of 14.50, she says.

"It was just more than I could pay," she says. "I was devastated, embarrassed, heartbroken."

In December, the house was sold at a sheriff's auction.

The local area has seen its share of sheriff's sales due to foreclosure, particularly in Auglaize County. Last year, 129 properties were sold in sheriff's sales at the county courthouse, up from 48 in 2001.

In Mercer County, 54 properties fell victim to sheriff's sales last year, up from 39 five years ago.

Ohio in 2006 led the nation in the number of foreclosures on record. Across the state foreclosure filings quadrupled from 2003 to 2005 in 61 of the 88 counties, according to Policy Matters of Ohio, a nonprofit research institute.

Policy Matters ranked Mercer County 55th in foreclosure growth from 1995-2005. Auglaize County listed at 34 and neighboring Van Wert County was higher on the list at 12.

Van Wert County Administrative Sheriff's Deputy Bobbie Jo Garcia said she sold more homes through sheriff sales last year than any realtor in the county, and she's not bragging. It's a tough job mentally, she said.

"Three days before Christmas we had to remove a mother and her three children from a home that was sold out from under them in August. We warned her she had to leave, but she wouldn't go," Garcia said. "Then we had to play Scrooge."

When Garcia began conducting sheriff sales in 1997 she held about 22 auctions per year. "Now, sometimes it's 22 in one day," she says.

Loan default can happen to anyone, she adds.

"I had a couple who lost a $400,000 home," Garcia said. "I see a lot of young couples who have the perfect job, the perfect house and then they split or lose a job and their world crumbles. It's scary."

Lost jobs, divorce, catastrophic health issues, consumer debt and spending all contribute to the growing number of delinquent home loans that often lead to foreclosure. Predatory lending - when loans are offered to risky borrowers - also is high on the list of contributing causes.

Government officials say the majority of today's foreclosure suits were filed by out-of-state subprime lenders who offered high-interest loans to borrowers with poor credit.

"I guarantee you there is a lender out there who will make you a loan regardless of your financial situation," explained Joel Ghitman, director of home ownership with the Ohio Housing Finance Agency (OHFA). "Everyone wants a home, it's the American dream. But sometimes people have to say no."

Flexible interest loans cause the most problems, experts say. They often begin at an enticing, low interest rate that in two to five years jumps 2 percent annually. The loans were popular several years ago during a housing boom.

Today, with a stagnant housing market, some homeowners are stuck making huge monthly payments for properties worth less than their purchase price.

Ghitman believes the key to the rising foreclosure problem is educating borrowers about the various types of loans and what they can afford.

"We require home buyer education to give people an idea of what they're getting into," Ghitman said about loans offered through OHFA. "Not many lenders do that."

OHFA, debuting in 1985, deals mainly with first-time buyers and offers only fixed-rate loans.

Hogan admitted banks and other lenders shouldn't be tempting home buyers who are financial risks but the responsibility, in the end, lies with the borrowers.

"If you do home buyer education first, even though you can't predict the future, your chances are better," Hogan said. "Some people just need to wait a year or two before buying a home, wait for their credit to get better."