Meet the Author

Yoonsoo Lee |

Research Economist

Yoonsoo Lee

Yoonsoo Lee was formerly a research economist in the Research Department. His areas of research include macroeconomics, labor economics, and regional economics.


Economic Trends

Foreclosures in Ohio

Yoonsoo Lee and Brian Rudick

The fourth quarter of 2006 saw a record number of new foreclosures in the United States, according to the latest National Delinquency Survey from the Mortgage Bankers Association. Nationally, 0.57 percent of all outstanding loans were foreclosed in the last three months of the year, up from 0.42 percent a year ago and resulting in 1.19 percent of all mortgages in the U.S. currently in foreclosure. The increase was driven by all major loan types, although subprime (high-risk) and FHA loans stood out.

Ohio, with 3.38 percent of all loans in foreclosure, has the highest percentage of foreclosures of any state in the nation. In addition, Ohio’s percentage of loans in foreclosure is almost three times as high as the national average (1.19 percent) and is well above that of any other state in the Fourth Federal Reserve District. Of all the 50 states, only Ohio, Michigan, Mississippi, and Indiana have more than 2 percent of loans in foreclosure.

Ohio hasn’t always led the pack in foreclosures. In fact, Ohio had a smaller percentage of them than the nation as recently as 1998. But foreclosures across the U.S., including Fourth District states other than Ohio, have been falling since the last recession, while Ohio’s have stayed substantially higher.

Delinquencies, or loans past due, are related to foreclosures, but not perfectly correlated. This is because not all delinquencies turn into foreclosures, and those that do take time to make the transition. With 7.25 percent of all loans past due, Ohio had the ninth highest percentage of delinquencies of all U.S. states in the fourth quarter of 2006. This was up from 6.67 percent a year ago.

In the mid-1990s, Ohio had a smaller percentage of loans past due than the U.S. and most Fourth District states. Currently, however, Ohio has a higher percentage of delinquent loans than any other District state. Note that West Virginia had a higher percentage of delinquencies than Ohio over the past few years, but this did not result in a higher percentage of foreclosures.

Ohio Delinquencies and Foreclosures Higher in all Loan Categories

As foreclosures have increased over the past year, a lot of attention has focused on the subprime market. Subprime mortgages are more prone to delinquent payments and foreclosure due to their risky nature. In addition, if interest rates increase, subprime loans are more likely to be severely affected, because a higher percentage of subprime loans have adjustable rates. Ohio’s share of subprime loans (16 percent) was the fifth highest of all the states in 2006, behind states such as Nevada, Arizona, and Florida. Despite this small share, subprime loans accounted for about half of all foreclosures in Ohio, and the U.S. in 2006. If measured in dollar value, however, the percentage would be smaller.

That said, Ohio’s foreclosure and delinquency problems may not just be due to the subprime market. Indeed, Ohio has higher delinquencies and foreclosures in every loan category (prime, subprime, adjustable, fixed) compared to the U.S as a whole.

Delinquencies & Foreclosures, 2006:QIV

Loans past due (%)

All loans in foreclosure (%)





Prime ARM





Prime FRM





Subprime ARM





Subprime FRM





Source: Mortgage Bankers Association.

Economic fundamentals, such as housing trends and labor market conditions, also play a large part in the number of loans that go into foreclosure and delinquency. When home values fall, borrowers who need to sell or refinance to avoid foreclosure have a harder time doing so because their property is not worth what is owed. If people lose their jobs and are out of work, they may have a hard time keeping up with their mortgage payments. In Ohio, home prices haven’t appreciated as fast as they have nationally, and in many metro areas lately, values have even declined. Ohio’s unemployment rate has been higher than the nation’s since 2003 as well.