Ohio to issue subpoenas to lenders

COLUMBUS, OHIO â€”  Ohio’s governor and attorney general said Thursday that they would issue subpoenas and take other aggressive measures against sub-prime mortgage lenders.

The subpoenas could lead to possible prosecution against lenders under antitrust and civil rights laws, as well as the Consumer Sales Practices Act.

The announcement came about a month after Gov. Ted Strickland asked the lenders to enter an agreement to help struggling homeowners stay in their homes through various measures, such as offering six months’ notice before an adjustable-rate mortgage was to reset.

But individual lenders failed to respond.

“Their refusal to sign the compact speaks volumes about their crass disregard for the people they have hurt and the communities they have destroyed house by house, street by street, block by block,� Ohio Atty. Gen. Marc Dann said.

Dann and Strickland have said repeatedly that they want to deal directly with the lenders, not the Ohio Mortgage Bankers Assn., their trade group. Strickland said the association submitted an inadequate proposal late Wednesday. The group, for example, said it would work toward notifying borrowers in advance of a rate reset or change in monthly payment, but gave no details.

“Unfortunately nothing very meaningful was shared with this office by the servicers as far as their willingness to work with the administration in a truly substantive manner,� he said.

A message seeking comment was left Thursday afternoon with the association.

Strickland said federal legislation was necessary to address the mortgage crisis, but said action must be taken in Ohio, which has had more home foreclosures than any other state after Florida and California. The state had 44,594 foreclosed homes in the first six months of 2007.

The Ohio Department of Commerce will use its rule-making authority to adopt some of the measures of the compact, including the six-month notification rule and a requirement that borrowers be provided with toll-free numbers to seek help, said department Director Kimberly Zurz.

The changes will also involve a more thorough auditing process that will make it easier to monitor whether companies are adhering to the requirements, Zurz added.