.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Iowa Mediation Service Inc. is hopping busy with calls. The nonprofit organization fielded more than 200 telephone calls on Sept. 12, a day after Iowa Attorney General Tom Miller announced the start of a new toll-free hotline to assist homeowners facing foreclosure due to subprime mortgage loans.

“We’re hearing interest-rate problems that are pretty mind-boggling,” said Mike Thompson, director of the West Des Moines-based organization, who said about 60 percent of the calls have been related to subprime mortgages. “As I look at (the calls), I was probably not prepared for seeing as many of the regular lenders. What that really says to me is, we’ve struck a nerve here.” The project is the state’s initial effort to address an alarming increase in loan foreclosures and delinquencies in Iowa. The rising tide of foreclosures is tied to homeowners who find they can no longer afford their house payments as the interest rates on their adjustable-rate mortgages reset.

“The thing about a lot of these people, they never thought the interest rates were going to go up,” Thompson said. “I just don’t know that people were cued in that this was really going to happen. So what I’m getting from people on a human level is pure shock.”

Miller’s announcement came several weeks after President Bush announced that the Federal Housing Administration would begin offering a new program on Jan. 1 designed to assist homeowners with good credit who had been steered by lenders to refinance into unaffordable adjustable-rate mortgages.

A number of nonprofit housing organizations throughout Iowa have also been working behind the scenes to assist homeowners.

As in the rest of the country, the subprime loans extended to less-creditworthy borrowers in Iowa have created the bulk of the problems. Of the 30,616 subprime mortgage loans serviced in Iowa, more than 2,600, or 8.6 percent, were in foreclosure as of June 30, while nearly 12 percent were seriously delinquent and more than 14 percent were past due. By comparison, the foreclosure rate for all loans in Iowa has averaged 4 percent.

Miller said the “No. 1 reason” behind the spike in delinquencies has been the “2-28” adjustable-rate loans that many lenders have offered for the past several years. The 2-28 loans begin with a low teaser rate for the initial two years, then readjust the rate upward for the remaining life of the loan.

“The whole concept that people enter into loans that they cannot afford is terrible,” he said, noting that new federal and state guidelines now include stricter guidelines requiring proof that the borrower can afford the loan for its entire term.

However, because lenders continued to offer the 2-28 loans into 2006, “that puts us through 2008, at least, for that problem,” Miller said. How well Iowa and other states can work to bring borrowers and lenders together to keep people in their homes will have a big effect on the extent to which it affects the economy, he added.

Miller said he plans to join attorneys general from about nine other states in meeting with representatives from some of the largest loan servicing companies later this month.

“And next month we plan to meet with some of the investors, to try to make sure they understand that restructuring can help everybody,” he said. “What we found at a conceptual level is that everyone agrees it makes sense; the challenge is in implementation.”

Lenders are hearing the same message at the federal level. Last week, U.S. Treasury Secretary Henry Paulson called on mortgage lending executives to identify borrowers facing big loan resets and offer them refinancing and other assistance.

In 2006, one of the largest subprime lenders, Wells Fargo & Co., made $27.9 billion in subprime loans, according to Inside Mortgage Finance, a trade publication. Earlier in the week, Wells Fargo CEO John Stumpf said the company will help borrowers struggling to make payments, and would consider modifying terms rather than foreclosing. Stumpf said the bank would consider permanently reducing interest rates, refinancing loans or postponing one or two payments.

Debora Blume, a spokeswoman for Wells Fargo Home Mortgage in West Des Moines, declined to comment on whether the company will work with Iowa Mediation Service through the new mortgage hotline program.

“Without knowing all the details, it’s premature for us to comment,” she said.

The Iowa Homeownership Education Project, based in Johnston, works with nine counseling agencies across the state to resolve or prevent mortgage delinquencies. Those agencies assisted 970 households in the first half of IHOEP’s current fiscal year. Of those cases, 229 were able to bring their mortgage current, refinance or negotiate forbearance or other agreements. Another 44 cases ended in foreclosure, while 33 declared bankruptcy.

“Success is so much dependent on how early people call,” said Stephanie Preusch, IHOEP’s executive director.

The Iowa Foreclosure Hotline number is (877) 622-4866.