Ohioans would be protected from foreclosures for six months under a moratorium approved by a House committee yesterday along party lines. Before the vote, legislators stripped a provision that would have allowed judges to modify terms of the mortgage.

Still, supporters were pleased that House Bill 3 would impose a new $750 foreclosure filing fee to help fund, among other things, foreclosure-prevention counseling.

Bill Faith, executive director of the Coalition on Homelessness and Housing in Ohio, said he also likes a provision that creates new licensing and regulation of home-loan servicers, who collect payments on behalf of banks or other investors that hold the mortgages.

The Ohio Department of Commerce would develop loan-modification standards for how servicers should work out terms to prevent foreclosure.

"Now, servicers are incentivized to foreclose if a person stops paying," Faith said. "There is no incentive to work it out."

In the first quarter of this year, Ohio ranked 11th in the number of property owners getting foreclosure notices. The state's total, 31,595, was 1.1 percent more than in the same period of last year, according to RealtyTrac. Ohio's foreclosure filings peaked in October 2007.

Franklin County foreclosure filings jumped from 6,000 in 2004 to nearly 9,300 in 2008. County Treasurer Ed Leonard testified in favor of the bill last month, saying the moratorium "will give lenders time and greater incentive to work out new payment terms with homeowners."

Rep. Mike Foley, D-Cleveland, called his bill "the strongest, most progressive foreclosure-prevention bill in the United States."

Faith said the moratorium in the bill might have limited effectiveness. For borrowers to qualify, they must continue to make at least half their monthly mortgage payment. Also, Ohio-based credit unions and community banks with less than $2.5 billion in assets are exempt from the moratorium and from the new $750 filing fee.

"These guys are bending over backward to work with borrowers," Foley said of credit unions and smaller banks. "Unlike the big guys, who could care less."

Foley wanted to let judges rework home-loan agreements if the property is worth less than what is owed on it. But facing a wave of critics, including banks and the Ohio Judicial Conference, he was forced to give up that section before putting the bill up for a vote last night.

Michael Adelman, top lobbyist for the Ohio Bankers League, said the changes are much-needed improvements to the bill. Still, he said, the new foreclosure fee is too high, and he questions the value of the moratorium.

"Other states are looking at 90-day moratoria. They've got some kind of end game, where they want to work on counseling or see how 'Obama dollars' stream down," Adelman said. "It's not clear what the end game is with Ohio's moratorium."

The bill moves to the full House, where Democrats hold a majority.

If it passes, it heads to the Republican-controlled Senate, where President Bill M. Harris, R-Ashland, said he has not read it but is willing to consider a moratorium.

House Republicans on the committee raised concerns about the new foreclosure fee and the moratorium. "Banks are not going to want to write mortgages in Ohio," said Rep. Cheryl L. Grossman, R-Grove City.

jsiegel@dispatch.com