With hundreds of its customers struggling to pay their mortgages, a Dominion Homes executive said the company needs to create programs and policies to help financially troubled buyers avoid foreclosure.

"The foreclosure rate in Ohio has caused us to take a second look," Vice President Thomas L. Hart said. "People need to be better prepared and armed to keep the home."

The unveiling of the new initiative to the Columbus Realtist Association yesterday came just days after the U.S. Department of Housing and Urban Development concluded a special, unscheduled audit of Dominion’s governmentbacked loans.

The group of black real-estate agents and mortgage brokers invited Dominion to talk about its lending practices and default rates on the heels of a four-day Dispatch series, "Brokered Dreams," published last month.

The series showed, among other things, that the Dublin-based company, which arranges mortgages through its financing arm, had the highest default rate in the nation among homebuilders whose mortgage divisions handled more than 1,000 government-backed mortgages.

According to the most current HUD data, 12.2 percent of Dominion homeowners in Franklin County fell more than three months behind on their government-backed mortgages within the first two years of ownership. The rate more than doubles the national figure.

"We do need to change our focus and focus on sustainability. Is there a way to help people keep their home? We need to reach out and learn," Hart told the group of about 40 realestate agents and community leaders.

Though the company has not mapped out a specific plan, Hart said that educating homeowners about making smart financial decisions after they buy will be critical.

Too many of Dominion’s customers sign up for credit cards and buy new cars and livingroom furniture soon after signing mortgages, Hart said. Then, as debt mounts, they find they can’t afford their mortgages.

"What happens after people close the house is life. Life happens," he said.

But some in the audience disagreed with Hart’s assessment of why so many Dominion customers fall into trouble.

"Your foreclosure rate seems to be astronomical," real-estate agent Cerise Allen said. "I don’t think it has a lot to do with ‘buyer beware.’ "

Hart bristled at the suggestion that Dominion faces no negative consequences when its buyers lose their houses.

"It’s a moral consequence, and it’s a business consequence," Hart said. "We do care when someone loses a home. It’s tragic."

He pointed to Dominion’s Galloway Ridge subdivision on the Far West Side, where more than one of every six homeowners have faced foreclosure, bankruptcy or both. Dominion has sold about 640 houses there.

"We have 161 more homes to sell in Galloway Ridge. Strictly from a business sense, we care that there are foreclosures there," Hart said. "It’s much tougher to sell homes."

But the company bears no direct financial consequences if the mortgages are insured by the Federal Housing Administration, which guarantees to reimburse 100 percent of losses. About half of Dominion’s loans are government-backed.

"We don’t see ourselves as a homebuilder causing foreclosure," Hart said. "We see the causation as much more of a macro issue."

He cited Ohio’s weak economy, the loss of thousands of manufacturing jobs and stagnant property appreciation as the culprits.

However, Dominion’s lending practices have raised red flags at HUD. During a routine audit in 2004, HUD found at least one violation in each of the 20 loans reviewed. Seven of the violations involved Dominion giving mortgages to buyers with shaky credit, income or jobs.

HUD auditors returned to Dominion last month to conduct a special, unscheduled review. Lenders typically face HUD audits every two years.

Dominion executives have not received the most recent audit results. HUD officials declined to comment until the report is completed.

However, high default rates and complaints are among the factors that trigger a special audit, HUD spokesman Lemar C. Wooley said.

"Targeted reviews focus on lenders considered to pose a higher risk to the department," Wooley said by e-mail from his office in Washington, D.C.

National homebuilder KB Homes, based in California, paid a $3.2 million settlement to HUD in July after a special audit turned up questionable lending practices. Violations included giving loans to borrowers who were ineligible, overstating income and failing to disclose all of the customers’ debts.

KB Homes was targeted because of its high two-year default rates, which ranged from 8.9 percent to 16.7 percent in six southwestern U.S. cities. In Dallas, Denver and Houston, the rates doubled the national figure. They were triple in Albuquerque, N.M., Fort Worth, Texas, and San Antonio.

KB has since turned its FHA financing division over to national lender Countrywide.

Dominion’s default rates rival those posted by KB. Its rates are more than double the national figure in Fairfield, Franklin, Licking and Union counties and in two of the four Kentucky counties where it sells houses.

In Ohio’s Madison County and in Louisville, Ky., the default rates are more than triple.

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