Risky high-interest mortgages have cost record numbers of people their homes, but not just in the big cities.

In Ohio, the loans are more common across the state’s farmlands and Appalachian hills, a Dispatch analysis of new federal data shows.

In 2004, people in rural areas were much likelier to sign mortgages with high interest rates, generally above 8 percent, compared with the average of 5 percent for a conventional loan at the time. Franklin, Cuyahoga and Hamilton counties, and other urban centers, ranked behind dozens of rural counties in the percentage of borrowers receiving highinterest loans.

Subprime loans are designed for people who can’t qualify for traditional mortgages because of poor credit, low income or the lack of a down payment — or people who want to borrow more than permitted by conventional standards.

The state’s biggest concentration of costly loans was in Hardin County, a patchwork of farms and crossroad towns halfway between Columbus and Toledo, where Amish buggies share two-lane roads with tractortrailers.

Nearly one in three mortgages in Hardin County carried a high interest rate, loans known as "subprime," in 2004, the most recent year for which numbers are available.

"They tend to come from big national mortgage lenders," said Col. Ken Hilty of the Hardin County sheriff’s office. "Local banks are more cognizant of what’s going on in the community. They know the people; the people know them."

Hilty and Lt. Keith Everhart oversee property evictions and the auctions of foreclosed properties. It’s tough duty, especially in a small county.

"I’ve actually had to foreclose on a guy I went to high school with (and) a mutual friend whose kids played with mine," Everhart said. "Most of the time, you know who they are. It’s not a pleasant experience, let me tell you."

During the past decade, federal data show, subprime loans grew from less than 5 percent of home loans to 19 percent nationally.

While subprime loans can provide a financial lifeline for people who otherwise couldn’t buy or refinance a home, they are inherently more expensive, complicated and ripe for manipulation by commission-driven mortgage brokers. When cus tomers sign loans, brokers are paid regardless of whether the borrowers later lose their homes.

Consumer groups and industry officials debate the extent to which predatory lending drives the subprime market and foreclosures. Layoffs, the growing number of Americans without health insurance and other broad economic forces all contribute to the problem.

Ohio leads the nation, by far, in the rate at which subprime borrowers fall behind and lose their houses. Nearly 10 percent were in foreclosure between July and September, triple the national figure, according to the most current numbers from the Mortgage Bankers Association.

The Dispatch analysis found that in 2004, a year when homeowners led a well-publicized refinancing spree to lock in rock-bottom interest rates, many other people were apparently refinancing out of desperation or poor judgment, signing loans with double-digit interest rates.

Problems spreading

The findings suggest that mortgage brokers, who for years have aggressively marketed high-interest loans in poor city neighborhoods, have expanded their reach.

"We’ve been predicting this was going to happen for years," said Lisa Rice, president of the Fair Housing Center in Toledo. "It’s fanning out."

The consequences of foreclosures are most visible in compact city neighborhoods pocked by abandoned houses, attracting the attention of researchers, politicians and consumer advocates. But The Dispatch has found that subprime lending and foreclosures are even more pronounced in rural areas.

"To me, that shows how widespread the problem is in the state," said Jeffrey D. Dillman, executive director of the Housing Research and Advocacy Center, a nonprofit agency in Cleveland.

Dillman, Rice and others said rural residents, like their innercity counterparts, are generally poorer and served less consistently by traditional banks. That would make them a logical market for subprime lenders.

Bob Niemi, president of the Columbus Mortgage Bankers Association, said they also might have fewer employment options when they lose a job. If deeply rooted in their rural communities, they also could be less willing or able to move elsewhere to find work.

So borrowing against their home becomes one possibility.

High-rate loans help a lot of people, he said. "Whether that’s right for them is their personal choice. It’s important they understand what their options are."

Several officials with the Ohio Mortgage Bankers Association didn’t respond to requests for comment.

Thomas Bier, who until recently was the longtime director of Cleveland State University’s housing research program, cautioned that one year of data can provide only limited insight. But he added that the concentration of these loans in rural areas, while surprising, parallels other trends.

Lenders, he said, have realized that if they write more loans, "They can absorb more losses and still be ahead. . . . The only way they could do that is by looking at the whole universe of buyers, not just central cities."

The findings echo those in "Brokered Dreams," a Dispatch series published in September that reported foreclosure filings were rising in rural and suburban counties.

In December, a U.S. Treasury Department report raised red flags about the possibility of high-rate loans worsening a national foreclosure boom.

Payments rising

Hardin County is feeling the effects of risky mortgages.

The toll can be measured in cold numbers, such as the spike in foreclosure filings or the growing number of property auctions burdening the small sheriff’s department.

It also can be seen in the anguished faces of people such as Tracy and Sammy Bogue, who have two daughters, ages 13 and 10.

The Bogues bought their Kenton home eight years ago. They consolidated the loans on their home and pickup truck, and now it appears they will lose the house.

The foreclosure notice was published this month in the local newspaper.

"It really took me hard," Mrs. Bogue said, choking back tears.

Mr. Bogue lost his job at the Kenton Iron foundry in November but recently found another. The couple hopes to save their home by making the back payments, including late fees and the lender’s legal costs.

If they do, it may not be for long. Their lender notified them that their 7.5 percent adjustable rate will immediately begin climbing. Their $583 monthly payment will increase to $671 in March, and to $775 in August.

The rate, the Bogues were told, will likely keep rising until it hits a maximum-allowable 14.5 percent because of the way their loan was written. They couldn’t afford the resulting payments under the best circumstances.

When they signed the adjustable-rate loan, Mr. Bogue said, "My understanding is it might go up a little or down a little." In fact, the fine print shows it never will go lower than the starting rate.

The Castles, parents of a 12-year-old boy, already have lost their home on 3 acres outside Kenton. They bought it nearly 20 years ago.

During a remodeling project in 2000, Frank Castle, a woodworker, ran low on money and refinanced the mortgage at 9 percent interest.

Then his wife wrenched her back at her factory job a year ago. Her employer disputed her injury claim. She eventually was paid, she said, but by then they had fallen behind in their payments.

They tried for weeks to catch up, draining savings and retirement accounts, before surrendering to foreclosure and bankruptcy.

"You pray to God something happens," Natuta Castle said, "but you can only pray so long."

Peggy and Ricky Brown, now in their early 50s, seized the chance two years ago to buy their first house. It is a small two-story home 10 miles up the road from Kenton in Dunkirk.

A year later, at a charity euchre game, Mrs. Brown was bemoaning the high interest rate and her mounting medical bills when a man came across the room and introduced himself as a loan officer.

He offered to help. "Turns out it was just somebody who wanted to make money," she said.

She thought she had consolidated all of her medical bills, but it turned out only some were paid.

And the 9.9 percent adjustable interest rate, which she thought could go up or down, never will go down under the terms of the loan. It can go as high as 15.9 percent, according to her loan papers.

"I don’t know much about what I’m getting into on stuff like this," she admitted. "It sounded good."

She made her monthly payments for a while with cash advances from a payday lender, but the fees finally caught up with her. Her mortgage holder began foreclosure proceedings in January.

Foreclosures spiking

Hardin County registered the eighth-highest jump in foreclosures in Ohio from 1999 to 2004 — a spike of 181 percent.

A similar acceleration occurred across much of rural and suburban Ohio, according to state Supreme Court statistics.

Last year’s numbers haven’t been tallied, but the situation appears to be worsening in Hardin.

In January, 24 foreclosures were filed, up from 11 last year, court records show. It was the busiest January for foreclosure filings in the seven years for which comparable records are available.

A closer look at last month’s foreclosures gives a glimpse into what’s happening in the county of 32,000 people, where the unemployment rate of 5.4 percent matches the state figure:

• Many of the loans included prepayment penalties, which prevent people from refinancing early without paying steep fees. At least seven states have outlawed prepayment penalties, according to a 2004 national study published by the Fannie Mae Foundation. Ohio law puts some limitations on prepayment penalties but does not outlaw them. The study found prepayment penalties to be more prevalent in mortgages from rural areas.

• All but two of the 24 Hardin foreclosures last month were high-interest subprime loans.

• All but five had adjustable interest rates, which typically offer lower starting rates but go up after two or three years.

• Some borrowers couldn’t make their payments after the rates went up, but most fell behind even sooner. The median life span of the loans was about 13 months from the time they were signed until the lender foreclosed.

People in rural areas, like those in the city, tend to get into trouble through a combination of financial desperation and marketing bombardment from lenders, said Donald Eager, a fair-housing consultant who works for Hardin and more than a dozen other rural Ohio counties.

"People are looking for a way out," Eager said. "They’re not thinking long term."