A new report by the Mortgage Bankers Association puts Indiana ahead on an unwelcome scale. Fifteen percentage of Indiana homeowners with a mortgage were either behind in payments or were in foreclosure as of June.

Nationally, past due loans, and loans in foreclosure added up to 13 percent. It’s not just Northwest Indiana’s big cities in trouble. Many of the area’s more affluent, outlying communities also are dealing with increasing levels of unemployment and foreclosure.

As part of our series Facing the Mortgage Crisis, WBEZ’s Michael Puente looks at the problems that empty homes bring to smaller communities.

Just a year ago, things were good for Ron Paul of Chesterton.

He was bringing home well over a hundred thousand dollars a year from his job at ArcelorMittal Steel in nearby Burns Harbor. So, he did what most Americans do when times are good: He spent.

PAUL: You go out and buy things, you know. My wife works. She has to have a car, I have to have a car. And, we did break down and bought a boat last year but work was good.

But as the economy began to slump, so did the number of people buying cars. ArcelorMittal, the world’s largest steel maker, laid off workers, cut hours for many others, including Paul.

PAUL: This year, I made $20,000 this year. So my income went down, you know.

Paul and his wife haven’t lost their home but his adjustable rate mortgage is making him very nervous. Paul says his mortgage went from about $800 a month to more than $1,400, before it settled down to about $1,000 a month.

He says their good credit hasn’t helped them get a better mortgage from their bank. Neither has the $2,200 they paid to a load modification broker.

PAUL: He called his up the other day and I was asking him, ‘What are you going to do?’ He said we’re backlogged so far but we’re taking care of it. As soon as I hung up the phone the next day, he faxed a letter to my wife saying there’s nothing we can do.

To those who know Northwest Indiana, the steep rise in foreclosures in 2007 didn’t come as a big surprise in places like Gary, where most incomes are low and unemployment high.

The foreclosure rate is at 16 percent in the city.

But the suburban areas, those bedroom communities where landscaped lawns, tree-line streets, backyard pools and three car garages are more the norm, surely those would be insulated from the foreclosure mess.

BENMAN: You would think people there would have the income to cover it. If they did have an adjustable rate, or some adjustment they could make, both people working, and so on.

Keith Benman’s with the Times of Northwest Indiana.

He led a team of reporters who analyzed lending trends in parts of Crown Point, neighboring Merrillville and Gary, cities in Lake County, east of Chesterton.

The reporting showed numbers and reasons that surprised the researchers.

BENMAN: First assumption there were thought Gary, East Chicago, we’ll find the highest numbers there. But what we actually found were yes, there was a high number in Crown Point, Merrillville. Those were the highest concentrations of subprime lending in the county and also some of the highest concentrations of foreclosures as well.

Before the downturn in the economy , banks and lending institutions were quick to give home and refinancing loans, especially in middle class areas like Crown Point, where bad credit hasn’t been much of an issue and borrowers had more options.

SHARP: Your no doc loans, where you needed a 720 or 780 credit score. So, there you have your more affluent buyers because they were buying the larger homes and the larger priced homes.

That’s Darrolyn Sharp, head of Consumer Credit Counseling of Northwest Indiana.

Sharps says communities like Chesterton, Valparaiso and Crown Point are home to many who obtained mortgages through what she calls creative financing.

SHARP: Those are the kinds of loans now that are being subjected to foreclosure. And, now you’re looking at the industry where the property values have declined, we can’t get the appraised value, so what are we supposed to do.

And, when the foreclosures create empty buildings in more communities that haven’t seen the problem much before, Sharp says that causes particular stress for neighbors.

ambi: neighborhood sounds

MALINICH: This house has been empty for over a year. And, they just put out the For Sale sign just the other day.

Bob Malinich is a retired steel worker who lives in Crown Point. The city is the hub of Lake County. It has an old fashion courthouse on a beautiful square with quaint shops and restaurants.

Malinich has lived in his house for some 30 years. He didn’t think the specter f foreclosure would move next door to his one-story, well-kept brick house.

MALINICH: I never thought it would but evidently it is.

Malinich says he doesn’t know what happened to the owners of the two-story, white with blue trim house. It now has a leaky roof.

MALINICH: It’s in bad shape, nobody took care of it. They just started cutting the grass.

Malinich worries what the vacant home, one of about a hundred in Crown Point, will do to his property values and those of others nearby.

MALINICH: It’s an old neighborhood but it’s nice. I like to see it being kept up.

With unemployment in Lake County at 10.5 percent, and more houses being shuttered, people in Crown Point are on edge.

URAN: That is a difficult time for everybody. There’s no doubt that we are homeownership of a lot of different areas industry that is outside of Crown Point: The Chicagoland area; the south suburbs of Chicago; the steel mills of Gary, East Chicago and Hammond. People work up there. When people lose their jobs, those affect our homeowners here.

David Uran is Cronw Point’s mayor.

Uran says the city keeps tabs on homes in foreclosure as well as those that look like they may be heading that way.

He says that’s critical because foreclosures have a ripple effect on the city’s economy, including the loss of property taxes.

This at a time when Indiana imposed a tax cap of 1-percent on a home’s value, which means even less money for cities like Crown Point.

URAN: Assessed valuation is key to our community. And with the property taxes of the 1, 2 and 3 caps, it’s very important that we keep that number as high as we can so that we can bring money back so we can put the services back to our residents who are currently still living here.

And, while the city can’t directly prevent a home from going into foreclosure, it tries to keep the neighbors from suffering from it.

URAN: We first get notified through the legal department that a house is foreclosed or being taken away from somebody, we immediately put that on a list to make sure the property on the outside is being maintained by our public works department so we can keep the quality of life of that neighborhood sound because we are valued on property values.

The state of Indiana looks to be doing its part to help. It’s set up a network for homeowners to confer directly with housing counselors.

The Indiana Attorney General’s office is putting attorneys on call for homeowners who need legal help in dealing with lenders.

And, a new Indiana law requires lenders to tell troubled borrowers that they have a right to a settlement conference.

That notice has to come within 30 days after a foreclosure action is filed with the court.