When home sweet home turns sour

One of the more unnerving events in people's lives is when they sign document after document in taking out a home loan. For the most part though, it works out fine.

But some find themselves immersed in a financial nightmare just a few years into that 30-year commitment. It's because the low teaser rate on their mortgage has ballooned into a locked-in monthly payment they cannot afford.

Or they simply got in over their head with a conventional loan. Or they speculated in real estate and lost. Sometimes it's having had the misfortune of taking out a loan with a disreputable broker. Certainly there are unforeseeable events that empty the checking account.

But foreclosures are heading up, way up. As we reported last week, North Cook County, Northwest Cook County and DuPage County saw the highest percentage increase in foreclosures in the six-county area from 2005 to 2006. Foreclosures in those three areas increased by 52.1 percent, 48.7 percent and 46.4 percent respectively, according to the Woodstock Institute, a nonprofit research and policy group.

Keep in mind that the majority of mortgage holders are making their monthly payments.

Still, there's no denying the shaky state of affairs in the home lending market. It prompted Illinois Attorney General Lisa Madigan to recently host a "homeownership preservation summit" to find ways to reverse the trend of skyrocketing foreclosures. Madigan cites the rising failure rate among sub-prime mortgages as a main contributor. She has authored legislation that would require mortgage brokers to verify ability to pay on the basis of what a mortgage payment would be at its highest rate, not at the teaser rate. Madigan's office has also been cracking down on predatory lending.

Last week, U.S. Rep. Judy Biggert, whose 13th District encompasses portions of Cook, DuPage and Will counties, got legislation approved in the U.S. House that would provide more resources to the FBI and U.S. attorneys to investigate mortgage fraud.

Biggert and Madigan are right to use the full power of government to protect consumers from unscrupulous lenders. But a primary law that also needs to be obeyed is not on the law enforcement books. It's called buyer beware.

You won't be tricked into a risky mortgage if you do your homework. Creative financing in the right circumstances can be a useful tool. But it's not a panacea. If a mortgage looks too good to be true to your ability to afford a house, it's not a good idea to sign the papers. If you don't understand the details in those documents, find someone who can explain them. Know what you can buy and how best to buy it.

Yet too many people with shaky credit or limited down-payment dollars just aren't understanding the risks they take with non-conventional financing. These inventive mortgages are nothing new. Back in 1998, foreclosures in Cook, DuPage and Will counties went up 91 percent for one of the same reasons foreclosures are up today -- inability to pay the high interest on loans to sub-prime lenders.

Taking out a home loan also means taking personal responsibility for the amount you borrow and how you borrow it.