At first glance, it sounded like the perfect home loan. When times were tight, Lola could pay as little as 1 percent interest on her Ashland home, postponing a payment or two until the end of the loan. And it was an adjustable-rate mortgage, which typically starts out lower than a fixed-rate mortgage.

Now Lola, who did not want to give her last name, must sell her beloved house. Rising interest rates have increased her payments, and she can't make them anymore on a Social Security income. She owes more on the house now than when she bought it.

Lola's not alone. Defaults on home loans in Jackson County have skyrocketed in the last year, increasing by 82 percent since 2005. According to the Jackson County Clerk's Office, 400 defaults were filed in 2006, compared with some 220 the year before. In December — always a busy month — 71 were filed last year, compared to 25 in 2005.

This year promises no better: 46 defaults were filed in January, 40 in February and 57 in March.

Financial experts say subprime loans are largely to blame. Almost 10 percent of subprime loans are delinquent — up from almost 4 percent a year earlier — compared to 1 percent delinquency in loans overall in the county's residential-commercial market, said John Zupan, a broker with Windermere/Van Vleet in Medford and ex-president of the Rogue Valley Association of Realtors. Almost 8 percent of mortgages in this area are subprime, he said.

Subprime loans appeared to be the golden door into a hot housing market, especially for first-time buyers with low credit scores. As long as rapid appreciation in home values continued and interest rates remained low, the borrower could continue to make the payments and build enough equity to refinance into another loan with a lower interest rate.

A pay-option adjustable-rate mortgage such as Lola's offered homeowners a choice each month of paying a lot or a little and gave flexibility for lean months, said Judi Robinson of People's Bank in Medford, who is helping Lola get into a better loan package for a new home.

But once the real estate market slowed, interest rates climbed — and so did the payments, and they proved unmanageable for a large segment of homeowners. A year ago, only a couple of defaults were filed every week. Now it's two, three or four a day, said Jackson County Deputy Clerk Chris Walker.

Calls to defaulting buyers were not returned or the buyers declined to comment. A summary of the "default with election to sell" statements in the clerk's office, however, listed many with high interest, payments and balance.

A home on Delta Waters Road in Medford had $172,000 owing, with 11.75 percent interest. One on Myers Court in Medford showed a $147,000 balance, 9.6 percent interest and delinquency of five, $1,255 monthly payments. Another, on Midway Road in Medford, had $135,000 owing at 8.25 percent, with four payments of $1,015 delinquent.

"The foreclosure rate here is fairly high. I get a list every week and it's an inch-and-a-half thick," said Chris Jacobsen, retail loan officer for Cox, Beard and Jacobsen in Medford. He estimates that 80 to 90 percent of foreclosures here are subprime.

Said Robinson, "I call them 'slime-prime' loans. I saw 16 foreclosures filed in the last two weeks. Most are nonconforming, subprime loans. People were not qualified and got loans with a 'stated income' program. The way they were qualified was pretty sad. The subprime market was developed for people who don't pay their bills."

The short sale broker result?

"Now they owe more than they have," Robinson said. "They're unable to sell because they owe more than it's worth. (Buyers) waited too long to sell. They panic and they do a short sale, where the mortgage company agrees to sell it for less than it's worth."

In short sales, sometimes the lender has to "eat" the loss and sometimes the borrower carries it as a debt, she said.

Defaulting borrowers can sign a "deed in lieu of foreclosure," meaning the house is signed back to the lender, with the lender's blessing. Foreclosure is "a cumbersome process" for lenders, said Linda Cade, housing director at Consumer Credit Counseling in Medford.

Where subprime borrowers once saw a rosy future with home values climbing at 10 or 20 percent a year, many now just want to unload the property. But because of sizeable prepayment penalties on subprime loans — and the normal 5 percent or so commission, plus lender fees and closing costs — they face a tight situation, said Cade.

"People get their work hours cut, hit a bump in the road and have a difficult time playing catch up," said Cade, pointing at borrowers with ARMs, whose interest has recently adjusted, and those with 80/20 loans, meaning they have a first mortgage covering 80 percent and a second loan for the rest.

Cade has found that a lot of subprime borrowers also didn't anticipate maintenance costs of new homes, including landscaping tools, furniture and such — so when ARMs reset, "you're just not prepared for the impact."

Consumer Credit Counseling tries to get subprime borrowers to regroup and deal with other debts, Cade said, so that "when they get into their next mortgage, it will be something they can afford."

Added Cade, "I tell people, don't try to hide from it. List your expenses, identify what you can cut, what options you have to keep your home. If you can't keep it, what options do you have to get out from under the mortgage, including refinancing, but make sure you understand the costs and terms.

"When folks come in, they are very discouraged. Losing a home is emotionally really tough. It hurts their sense of accomplishment. They don't want their friends or family to know."

Foreclosure may begin after three months of delinquency, and borrowers have six months to catch up on payments.

The subprime implosion, which is taking place nationally, has resulted in the bankruptcy of 15 or 20 large lenders.

Housing analysts predict 1 million to 3 million foreclosures nationally in 2007, possibly resulting in a recession, according to national news reports. Michigan, Indiana and Ohio appear the hardest hit.

The subprime mortgage market, reports the Wall Street Journal, "has unraveled with impressive speed and intensity." Subprime loans were developed for buyers with bad credit who couldn't qualify for conforming loans — and had little or no down payment, said Robinson, noting that often the loan officers didn't know the market well.

"It's pathetic, sad, throwing caution to the wind like that," she said. "The subprime market had no strict guidelines and allowed buyers to extend their debt-to-income ratio out to 55 percent, when it should be under 44 or 45 percent to be safe. The people they extended credit to didn't have a favorable credit history and could be just months out of bankruptcy.

"If they haven't paid their bills now, what makes you think they're going to pay their mortgage in the future?"

Referring to the loose standards for qualifying borrowers — and the steep adjustments and harsh prepayment penalties — Robinson said, "It makes me vibrate with anger."

The subprime lending industry in 2003 became "extremely aggressive" in getting money lent out, said Jacobsen. Before that time, borrowers couldn't get a loan with a credit score under 650, but lenders began giving 100 percent loans with a 550 score, he said.

"The price of property was going up and the quality of buyers was going down. The subprime lenders led us down this path, but I think the rate of foreclosure is slowing down because the people with bad loans are going through the mill and being weeded out."

John Darling is a freelance writer living in Ashland. E-mail him at jdarling @ jeffnet.org.