The state of Ohio has helped some homeowners avoid foreclosure by cobbling together state and county emergency funds. But the $3 million put aside for assistance will hardly heal the subprime loan crisis. And while state and local officials have conceded that a slowing economy has contributed to the problem, they have also been blunt about the mortgage industry's responsibility: fraud and predatory loans have ruined lives.

There is a method homeowners can learn that may help put money in their pockets. But don't expect the banks, creditors and the mortgage industry to teach it. That would ruin their shell game. If homeowners could actually benefit when interest rates fall or rise - today's biggest fear for those folks holding adjustable rate mortgages (ARMs) - the money people would no longer be the only players in the game.

What's the method? Hedging the cost of your mortgage by using options on U.S. Treasury bonds. As interest rates change - and they do constantly - these options change value. Homeowners can learn to buy inexpensive options and sell them for gains, but there are risks. And before risking a penny homeowners will need to take the time learn the process.

Although time may not be a commodity homeowners have in abundance, what choice is there? Consider Ohio. The state is suffering from foreclosure rates that are three times the national average. In 2006 Ohio discovered that foreclosures in 12 of its 13 largest counties increased by 25 percent over the previous year when an estimated 80,000 homes were foreclosed. Unfortunately, the foreclosure tidal wave will likely to grow because in 2008, $14 billion in subprime loans will reset. (A reset may mean homeowners will suddenly find themselves with a much larger mortgage bill.)

So time is of the essence. But so is knowledge. And that's what so many new homeowners lacked when they were suckered into signing adjustable rate mortgage agreements. Yes, they must bear some responsibility for accepting a risky proposition. But it's hard to blame them when home ownership has been touted as the fulfillment of The American Dream.

But, again, I ask, what choice do they have but to get some knowledge that will benefit them? As much as state officials try to nudge the mortgage industry, in some cases laws prevent them from doing the right thing. For example, Ohio Gov. Ted Strickland (D) tried to get mortgage-service companies to voluntarily give a six-month notice before resetting mortgage rates. The firms declined, in part, because of state laws, sources say.

So the plan for 2008 is to get smart, homeowners. Learn to participate in at least one of the markets that most affects your situation. I suggest options on U.S. Treasury bonds futures. It costs you nothing to watch and learn about this global market - one of the largest - as it changes day-to-day. And as economic data is released, you can be sure this market changes, often dramatically.

Let me be clear: I'm not talking about the purchase of U.S. Treasuries. The stocks and bonds you may hold in your investment portfolio are part of a long-term strategy. Learning to trade options on the U.S. Treasury bond on the Chicago Board of Trade gives you the ability to remain liquid and adjust to short-term changes. This is why you want to master this market. It can provide monthly income to help pay your mortgage - if you understand the risks and practice like your life depended on it.

And it does, doesn't it?

Copyright 2007

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