Ohio Conference on Foreclosure Intervention

Mayor Dean Depiero of Parma, Ohio, hosted a conference on June 21st, 2006 that focused on foreclosure intervention.  Co-hosts were Franklin County Treasurer Richard Cordray and Cuyahoga County Treasurer James Rokakis.  Director of the Cuyahoga County Foreclosure Prevention Program, Mark Wiseman, represented Mr. Rokakis.

Other attendees included representatives of several Ohio non-profit organizations, local HUD offices, mortgage field services companies, city building and code enforcement departments and Ms. Deb Oakley, SVP, Default Management at National City Mortgage.

Throughout the day, informational and discussion sessions focused on the continued increase in the numbers of foreclosures plaguing Ohio.  Local actions and new initiatives to combat this problem were described.

The volume of foreclosures continues to rise in Ohio.  Although this situation affects homeowners from all socio-economic strata, there has been a noticeable increase recently in higher-value homes. With interest rates on the rise, the situation appears to be steadily deteriorating for Ohio residents. Until now county commissioners have not had designated entities responsible for addressing this issue.  Both Franklin and Cuyahoga counties have instituted early intervention programs with the goal of foreclosure prevention starting at the earliest possible stage in the process.

It was agreed that there are numerous causes of foreclosures, many being inter-related, including:

·            Uneducated consumers
·            Predatory lending
·            Adjustable rate mortgages with the interest rate tied to London InterBank Offered Rate (LIBOR), a number that represents the daily interest rate banks use internationally for short term, unsecured loans to one another.

·            “No doc” or “low doc” loans, where only the borrower's income is reviewed for loan approval, not taking into account other debts that could affect the ability to maintain mortgage payments.  Similarly “stated income, stated assets” loans accept what the borrower says his or her financial status is, with little or no verifications.

Mr. Kermit Lind, Director of the Urban Development Law Clinic at Cleveland State University gave a presentation on dealing with vacant and abandoned property after foreclosure.  Professor Lind reviewed the foreclosure process in Cuyahoga County beginning with the first missed mortgage payment and culminating in the Sheriff's sale and deed filing, elaborating on who is the legal owner of the property at each stage.  Several city officials voiced concerns about delays in the process of picking up and recording the deed after a mortgagee submitted the final bid at the Sheriff's sale.  A number of jurisdictions discussed amending local legislation in order to specify who is responsible for the property during this time period.

Others enumerated success working with Safeguard Properties Inc. to resolve code violations.  The idea was discussed to require that mortgagees designate at the time of the foreclosure who is their field service vendor, responsible for the physical upkeep of the property. Another item of discussion revolved around what may be an increasing trend that has city code enforcement officials seeking to have cited properties repaired by the “lender in possession” during the pre-foreclosure stage of the process.  Lender liability and other legal as well as practical considerations must be addressed further to arrive at a resolution for this issue.

Ms. Deb Oakley described some of the misconceptions typically associated with banks and mortgage companies, including several that were discussed throughout the conference sessions.  While there continue to be issues with unregulated mortgage institutions, the typical national bank strives to minimize foreclosures.  Ms. Oakley stressed the efforts of staff in Loss Mitigation Departments who offer the debtor in default different workout options to avoid foreclosure.  A distinct shift in employee ratios has occurred over the last couple of years, away from collections, over to Loss Mitigation.

Most lending institutions are required to follow the guidelines in place by the investors who fuel the secondary market, a vital cog in a stable economy. Investors typically lose between $25,000-$50,000 on each foreclosure; therefore, they require loan servicers to utilize an array of loss mitigation options in communications with the borrower prior to initializing foreclosure. 

The current initiatives of the early intervention programs revolve around education and contact at the beginning of the delinquency.  Non-profit organizations (such as Save Our Homes Task Force or Firstlink) work in conjunction with unions, government officials, lenders, and investors to create local workshops in targeted areas. These workshops offer direct counseling, information, and explain potential work-out options presented by mortgage company loss mitigation specialists in attendance. This environment has been successful in overcoming hesitancy by the borrower to work directly with their lender.

Numerous suggestions were made regarding early intervention.  A representative for Habitat for Humanity proposed incorporating financial responsibility into high-school and elementary school curricula.  Current actions being employed by the early intervention programs include:

·            Working with lenders and the Mortgage Bankers Association (MBA) to notify borrowers about upcoming workshops.
·            Utilizing volunteers to leave door hangers or place posters in neighborhoods with high foreclosure rates.  
·            Purchasing credit history reports to determine who is delinquent on mortgage payments; contacting those homeowners to offer assistance information.
·            Ensuring that homeownership retention information is provided at the time of the purchase.
·            Reviewing tax delinquency reports, which could be an early indicator of mortgage delinquencies.

All participants, representing the various entities, stressed the necessity to work together to reduce a growing problem, with many negative implications, that may become even worse in their local communities in the near future.

To view a recent Cleveland Plain Dealer article on this topic, please click on the following link.

Cuyahoga County (OH) Foreclosures