One of the bright lights of the U.S. economy has been the steadily rising value of homes. However, one thing driving the boom has been cheap, high-risk credit, and that particular chicken is coming home to roost. This NYT story is about how Cleveland and some other hard-hit U.S. cities are trying to stave off blight and real estate panic.
In suburbs like this one, officials are installing alarms, fixing broken windows and mowing lawns at the vacant houses in hopes of preventing a snowball effect, in which surrounding property values suffer and worried neighbors move away. The officials are also working with financially troubled homeowners to renegotiate debts or, when eviction is unavoidable, to find apartments.
“It’s a tragedy and it’s just beginning,” Mayor Judith H. Rawson of Shaker Heights, a mostly affluent suburb, said of the evictions and vacancies, a problem fueled by a rapid increase in high-interest, subprime loans.
“All those shaky loans are out there, and the foreclosures are coming,” Ms. Rawson said. “Managing the damage to our communities will take years.”
Cuyahoga County, including Cleveland and 58 suburbs, has one of the country’s highest foreclosure rates, and officials say the worst is yet to come. In 1995, the county had 2,500 foreclosures; last year there were 15,000. Officials blame the weak economy and housing market and a rash of subprime loans for the high numbers, and the unusual prevalence of vacant houses.
Foreclosures in Cleveland’s inner ring of suburbs, while still low compared with those in Cleveland itself, have climbed sharply, especially in lower-income neighborhoods that border the city. Hundreds of houses are vacant because they are caught in legal limbo, have been abandoned by distant banks or the owners cannot find buyers.
The suburbs here are among the best organized in their counterattack, experts say, but many suburbs elsewhere in the country have had jumps in foreclosures and are also working to stem the damage.
Outside Atlanta, Gwinnett and DeKalb Counties have mounted antiforeclosure campaigns while several towns south of Chicago are forcing titleholders to fix up empty houses, or repay the government for doing it.
This part of the story is despicable:
In a report for Shaker Heights, Mark Duda and William C. Apgar of Harvard University found that expensive refinancing deals had been aggressively “push-marketed” in the city’s less affluent west and south sides, bordering Cleveland. They said that “the rising number of foreclosures threatens to undermine the stability” of those areas.
“The moral outrage,” Ms. Rawson, the mayor, said, “is that subprime lenders have targeted our seniors and African-Americans, people who saved all their lives to get a step up.”
About one-third of the residents in Shaker Heights and Euclid are black.
Early last year, James Rokakis, the Cuyahoga County treasurer, started a countywide foreclosure-prevention program, which pays community groups to educate people about loans and help defaulting borrowers negotiate with lenders.
In the late 1990s, Mr. Rokakis said, the flight of manufacturing jobs was the major cause of rising foreclosures but around 2000, the surge in careless lending began to wreak havoc.
Mr. Rokakis estimated that more than three-fourths of the current foreclosures in Cuyahoga County involved subprime loans, some of them blatantly unwise or dishonestly portrayed to buyers. Only last year did Ohio tighten its laws to require more complete disclosures to borrowers.