Meet the Author

O. Emre Ergungor |

Assistant Vice President and Economist

O. Emre Ergungor

Emre Ergungor is an assistant vice president and economist in the Research Department at the Federal Reserve Bank of Cleveland. He is responsible for the household finance section of the Banking Policy and Analysis Group, which conducts research on regulatory policy and banking issues and provides advice on financial policy formulation. He also oversees the Federal Reserve System’s Muni Financial Monitoring Team (FMT), which monitors municipal bond markets, state and local funding, and public pension funds. Dr. Ergungor specializes in research related to financial intermediation, information economics, housing policy, and credit access in low- to moderate-income households.

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Meet the Author

Beth Mowry |

Research Assistant

Beth Mowry

Beth Mowry was formerly a research assistant in the Research Department of the Federal Reserve Bank of Cleveland. Her work focuses on labor markets and business cycles.


Economic Trends

Foreclosures in Ohio

O. Emre Ergungor and Beth Mowry

The number of new foreclosures across the United States ticked up mildly in the first and second quarters of 2010, according to the Mortgage Bankers Association’s National Delinquency Survey. Nationally, 1.17 percent of all outstanding loans went into foreclosure in the second quarter (April-June), a figure unchanged from the first quarter but down from 1.47 percent a year ago. All in all, 4.57 percent of all mortgages in the U.S. are currently in foreclosure. The decrease in the number of loans entering foreclosure over the past year was predominantly driven by a decline in problem adjustable rate mortgages (ARMs) of all major loan types, particularly subprime (high-risk) loans.

When the housing bust was just setting in back in 2006, Ohio’s foreclosure rate was the highest of any state in the nation (3.38 percent) and about three times as high as the national average (then 1.19 percent). Now—four years later—Ohio has the sixth highest percentage, with 4.82 percent of all mortgage loans in foreclosure, and the national average has nearly caught up. What hasn’t changed, however, is that Ohio still easily leads the other states in the Fourth District (Kentucky, Pennsylvania, and West Virginia) in foreclosure rates.

Foreclosures are correlated with delinquencies, or loans past due, but not perfectly. This is because not all delinquencies wind up as foreclosures. With 10.3 percent of all loans past due, Ohio has the eleventh highest delinquency percentage of all U.S. states, as of the second quarter of 2010. This marks a slight drop from the series’ first-quarter peak of 10.5 percent but an increase from 10.3 percent a year earlier.

In the mid-1990s, Ohio had a smaller percentage of loans past due relative to the U.S. as a whole and most of the other states in the Fourth District. Currently, however, the percentage of delinquent loans in Ohio is higher than in any other Fourth District state. It is interesting to note, though, that while most states’ foreclosure rates tend to follow a similar trajectory as their delinquency rates, West Virginia has done fairly well at bucking this trend. West Virginia’s delinquency rate has risen side-by-side with Ohio’s since 2006, soundly above other District states, and yet its foreclosure rate sits considerably below the group. This is mainly because West Virginia is a nonjudicial-foreclosure state. As a result, foreclosed properties move more easily, relatively, from “foreclosed” to “real estate owned” status, that is, when the property is owned by the lender.

As foreclosures have risen rapidly over the last four years, much attention has been centered on the subprime market. Being riskier than other types of loans, these mortgages are more likely to be delinquent and go into foreclosure. Subprime loans as a category are also more likely to be adversely affected if interest rates increase, because a higher percentage of subprime loans have adjustable rates—39 percent of subprime loans have adjustable rates, compared to 14 percent for prime loans.

Generally speaking, states’ shares of subprime mortgages still being serviced (not written-off) have been gradually declining over the last few years. Ohio’s current share of subprime loans (12.1 percent) is roughly four percentage points lower than its share in 2006 but still the fourth highest in the U.S., behind only Florida, Mississippi, and Nevada. Given the state’s 12.1 percent share, though, subprime loans are responsible for a disproportionate percentage of foreclosures in Ohio (30.2 percent). However, in 2006 Ohio’s subprime loans accounted for half of all foreclosures in the state, illustrating how foreclosures have hit other loan types hard in recent years as well.

The deterioration in the credit quality of all mortgage categories is evident in the next table. In 2006, at the start of the housing downturn, Ohio had higher delinquencies and foreclosures in every loan category (prime, subprime, adjustable, fixed) compared to the U.S. as a whole. Now, while Ohio’s loans are still performing more poorly in several categories, it is evident how the U.S. has managed to come within arm’s length of Ohio’s foreclosure rate. The U.S. has a higher percentage of foreclosures in prime ARMs and subprime ARMs, and has just slightly lower rates in other loan categories.

Delinquencies and Foreclosures, 2010 and 2006

Loans past due (percent)
All loans in foreclosure (percent)
Prime ARM 2010
Prime FRM 2010
Subprime ARM 2010
Subprime FRM 2010

Source: Mortgage Bankers Association.