Tighter mortgage regulation sought in Ohio


COLUMBUS - Gov. Ted Strickland first dangled a carrot before Ohio mortgage lenders, urging them to come to the table to address the state's skyrocketing foreclosure rate.

Yesterday, he wielded the stick as his administration proposed tighter regulation of the industry. Attorney General Marc Dann announced the issuance of subpoenas in civil anti-trust and consumer protection investigations of the subprime loan industry.

"[Lenders'] refusal to sign the compact speaks volumes about the crass disregard for the people they have hurt and the communities being destroyed house by house, street by street, block by block,'' said Mr. Dann.

Mr. Strickland's administration had proposed tentative language for a compact that lenders would sign, committing themselves to, among other things, providing six months' notice to borrowers when their interest rates are about to reset, assigning an employee to work with the homeowner throughout the foreclosure process, and encouraging mitigation as an alternative to foreclosure.

The Ohio Mortgage Bankers Association and its national counterpart responded Wednesday with its own proposal, which Mr. Strickland rejected as lacking specifics and not coming from the individual lenders that the state licenses.

"I continue to believe the provisions that we asked for in the compact were reasonable and could result in positive outcomes for both the lender as well as the borrower,'' Mr. Strickland said. "No one wins in a foreclosure, and if we can prevent foreclosures, then everyone is benefited, including the lender.''

Ohio continues to have one of the highest foreclosure rates in the nation, a situation expected to be exacerbated in coming weeks as mortgage lenders raise adjustable interest rates on loans borrowers who may not have qualified for loans before banks loosened credit policies.

"You can appreciate that having our individual loan entities - the Citigroups, the Chase-Manhattans, the KeyBanks - addressing this on a state-by-state basis would be astronomical,'' said Jeff Wherry, executive director of the Ohio Mortgage Bankers Association. "We prefer one national guideline.''

He suggested Ohio's real problem is its lagging economy. "The leading causes for foreclosure have been loss of job, divorce, and illness,'' he said. "That's still the case. There seems to be an inference that somehow banks benefit from foreclosure. That's nonsense.''

Kimberly Zurz, Mr. Strickland's director of commerce, said her office will become more aggressive in its regulation and auditing of the mortgage banks it licenses and will write some of the proposed compact's provisions into rules for the industry. That process, however, could take several months.

"The industry has ignored the diplomatic efforts of the governor to partner in a joint effort,'' said Bill Faith, executive director of the Coalition on Housing and the Homeless in Ohio. "This is devastating our communities.''

Ohio Supreme Court Justice Thomas Moyer used yesterday's announcement by the governor to generally push for greater use of mediation to resolve foreclosure cases.

He noted that foreclosure filings in Ohio courts have increased 41 percent this year. The number of cases is expected to reach nearly 81,000 by the end of the year.

Contact Jim Provance at:


or 614-221-0496.