Fraud Joins Unemployment as Big Factor in Foreclosure Rates.

WASHINGTON -- Increasing foreclosures is fast becoming the No. 1 problem facing their communities, with outright mortgage fraud, questionable lending practices and job loss all contributing factors, according to a new survey conducted by the National Alliance of Community Economic Development Associations.

The NACEDA, a national group representing local organizations who work with low- and moderate-income populations, said its member organizations are key participants in state-level initiatives designed to help families save their homes, including state legislation, to curtail abusive lending practices among other remedies.

Although foreclosure rates nationally have been falling, there are several states where they are rising, including Ohio, Michigan, Indiana, California, Florida, Nevada and Arizona. Subprime rate loans in the last four states are responsible for much of the foreclosures. The rate of foreclosures started on subprime ARM loans jumped from 2.7% to 3.23%, with most of that increase in those states, according to the Mortgage Bankers Association.

"In Indiana, a person could have a criminal record, including felony convictions and there was no oversight responsibility that would prevent this person from being a mortgage broker," said Christie Gillespie, executive director of the Indiana Association for Community Economic Development. "Our legislature passed legislation this year to address this."

NACEDA chairperson Diane Sterner said, "NACEDA members represent thousands of local organizations across the nation that are on the front line of this problem, serving as that key 'trusted advisor' who looks out for the best interest of the consumer and assists in finding a solution to this devastating foreclosure problem."

Ohio, Michigan and Indiana account for 19.9% of the nation's loans in foreclosure and 15% of all of the foreclosures started in the U.S. during the first quarter. All three states have suffered large declines in manufacturing employment.

NACEDA's survey asked 20 ...