The calls, said Bob Thomas, don't always come from poor people.

"One prospective client makes $100,000 a year," said Thomas, director of Tabor Community Services, which provides financial counseling. But he, too, had gotten a mortgage with low, low "teaser" rates that soon leapt to the stratosphere; and he, too, was worried he couldn't make the higher payments, and might lose his home.

Staffers who provide mortgage counseling, Thomas said, report that demand for their time is exceeding the supply. "We're seeing all income levels," he said. And the number of calls "clearly has been headed up."

That might be a sign of things to come, as what is being called the subprime "crisis" comes to Lancaster County.

If it comes, that is.

Local experts say they don't expect the fallout to be particularly harsh here. In part that's because many local banks never offered subprime loans, also called "Alt A" loans because they were targeted primarily at those with less-than-stellar credit, enticing them with low initial rates that rise after a fixed period of time.

The tail end of the recent housing boom was fueled in large part by these loans. Now those bills are coming due, and as the growth in home prices has leveled off, many regions of the country are already seeing higher foreclosure and delinquency rates.

Lancaster County has seen little of this yet. Sheriff's sales resulting from foreclosures are about par with what they were at this time last year, said Lancaster County Sheriff Terry Bergman, "but I'm hearing some whispers that foreclosures are supposed to rise" as the year wears on.

Touch of the 'exotic'
Nationally, subprime fears are already weighing on the economy. The president of the Federal Reserve Bank of Dallas said last week that damage from the subprime market has been largely "contained." At the same time, a UCLA report noted that the subprime market has all but dried up, and a tougher credit environment will limit the number of first-time home buyers entering the market, while making it more difficult for existing homeowners to refinance subprime loans before they face default or foreclosure.

Limiting the damage here may be the fact that these subprime loans are considered somewhat "exotic," and many of the established local banks still don't offer them, or didn't until recently. That doesn't mean local lenders will be unaffected, however; Fulton Financial Corp. last month announced it expected a $5.5 million loss because it will repurchase loans from its subsidiary Resource Bank of Virginia Beach, Va. The losses, said Fulton Senior Executive Vice President and Chief Financial Officer Charles Nugent, come mainly from a type of loan program that did not require the buyer to verify his or her income.

M&T Bank, with several branches in Lancaster County, announced last week it would not auction off $883 million worth of loans to investor groups, a typical move in the banking industry, because it would lose money on the sale, according to an article in The York Dispatch.

Though these particular loans weren't subprime, "There's a lot of skittishness. Investors have shown less interest in any product that's not a traditional prime mortgage," bank spokesman Michael Zabel told The Dispatch.

Last year, an estimated 40 percent of mortgages nationwide were subprime. The number is lower here. "I would say about 10 to 15 percent of my buyer clients in the last two years have been strictly subprime, or 'Alt A,' " said Jeff Geoghan, an agent with Long & Foster Real Estate who maintains a "Lancaster County Real Estate Blog" at lancastercountyblog.blogspot.com. "I know there are agents out there who do a lot more than 15 percent. There are also those who don't work with anyone but 'A' credit."

He says he's definitely seeing more foreclosures on the market than before, and first-time buyers now need a better credit score to find the loan they want. At the same time, though, he doesn't expect doom and gloom here; "I get daily comments along the lines of, 'Aren't prices way down?' but that's just not the case," he said.

On the watch
Frank Christoffel of the Lancaster County Association of Realtors concurs: "When you look at our market overall, it's still doing rather well," he said. "Prices are still going up, not as much as they were, but we'd been drinking out of a fire hydrant."

Foreclosures and delinquency rates rose in Pennsylvania in 2006, though it ranked just 19th in the nation in the number of foreclosures. Rust Belt states such as Ohio, Indiana and Michigan, where job losses exacerbate the problem, were hardest hit. According to the Mortgage Bankers Association, subprime loans constitute 13 percent of outstanding mortgages, but more than 60 percent of foreclosures.

"We're keeping an eye on things, but we don't expect the housing apocalypse," said Dan Egan, a spokesman for the Pennsylvania Department of Banking. Still, the department expects to release a new round of proposed regulations by early May to address the rising subprime foreclosure rate, according to the Pittsburgh Business Times.

Subprime loans, he noted, have long been an issue in Pennsylvania; indeed, legislation to regulate "predatory lending" was introduced in 2005 after the department issued a report showing Pennsylvania had one of the highest foreclosure rates for subprime loans in the nation. A department study showed that between 2000 and 2003, foreclosures in Lancaster County steadily increased from 734 to 958. And in general, the report noted, foreclosures are more common in areas with lower-than-average housing values, lower-than-average family incomes and a higher percentage of minority households.

"We've long seen a steady volume of folks coming in with subprime loans," said Patrick Cicero, an attorney with MidPenn Legal Services in Harrisburg who has worked with struggling Lancaster-area homeowners. "But anecdotally, over the last six months, the numbers have been higher. When the housing market was hot it allowed people to purchase homes who shouldn't have been buying them.

"We were selling them the American dream, and giving them a nightmare."

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Gil Smart is associate editor of the Sunday News. You can contact him at gsmart@lnpnews.com.