DaytonDailyNews.com

COLUMBUS — They're called "teaser rates" and they could make Ohio's mortgage foreclosure crisis even worse in coming years.

The loans are for adjustable rate mortgages (ARMs) with low, fixed interest rates for the first two or three years. After that initial period, the rates increase, as often as every six months, so that monthly mortgage payments grow dramatically, according to a report released Thursday by the Coalition for Homelessness and Housing in Ohio.

According to the report, $14 billion in ARM "teaser rate" loans will be reset in Ohio this year and in 2008, likely creating an increase in foreclosures and affecting at least 200,000 families.

Even before this anticipated surge, Ohio nationally has the second highest rate of loans in "serious delinquency" — either in foreclosure or more than 90 days late. Ohio's 5.12 percent rate is behind only Mississippi, 5.3 percent, and just ahead of third place Louisiana, 4.98 percent, two states devastated by Hurricane Katrina.

"The coming foreclosure crisis hitting Ohio is on the scale of Hurricane Katrina hitting the Gulf Coast, except it is happening silently, one foreclosure at a time," Bill Faith, executive director of the homelessness coalition, said in a press release.

The "teaser rates" are only part of the problem, the report said.

Inflated appraisals and high loan-to-value mortgages have increased debt problems. In 2006, 24 percent of ARM borrowers getting new loans owed more than the value of their home at the loan's origination, according to the report.

The study expands on a report issued earlier this week by Policy Matters Ohio, a Cleveland-based research institute, that showed foreclosure filings jumped by nearly a quarter last year in Ohio, the largest increase in recent history.

The number of filings in 2006 — 79,000 — marked an almost fivefold increase over 2005. Warren County had the sharpest increase among eight counties in the Dayton region, with foreclosure filings increasing more than ninefold since 1995.

The Policy Matters report also showed that Montgomery County had the second highest foreclosure filing rate last year — 9.4 per 1,000 people — behind only Cuyahoga County, which includes Cleveland.

Contact this reporter at (614) 224-1608 or whershey@DaytonDailyNews.com.