The Observation Deck

I hope everyone is following the PD's excellent series on the reality and truth of the mortgage crisis. For all those who claimed it was "just homeowners buying more than they could afford" you may be awakened by the articles. For the thousands and thousands of dollars cities and states are spending on prosecuting and bailing out from mortgage FRAUD, I would have to say there must have been some fraud in the mortgage companies!!!

The domino effect is crippling and hits every single homeowner. I hope cities can find creative and inventive ways to save foreclosed homes and find homeowners for them. The article today said investors from other states are buying up homes for $1!!!

Justine-

The Plain Dealer has published a really fine special report by Phillip Morris.

Mr. Morris has been, in my small opinion, growing as a columnist by leaps and bounds.

I have been moved to email him when he has thoughtfully written about the problems of mental illness in the homeless population. He was kind enough to respond.

He excels at examining issues affecting those who have been marginalized or are self-marginalized and has won at one least faithful reader.

An interesting element that hasn't really been addressed is the plight of the tenants in properties that go into foreclosure.

Transfer of the property at Sheriff's sale essentially nullifies any rental agreements and leases. The tenants become what amounts to squatters, and can be evicted after a three day notice. Owners of rentals end up losing their investment property in a foreclosure, but, tenants end up losing their homes.

Recently I've tried to convince a couple of banks who bought back rentals at Sheriff sales to honor the previous leases, to allow the tenants to stay, pay rent and keep the house secure and occupied. One had lived in the rental for over 12 years. The categorical response was that the tenant must move or face eviction as the bank wanted the property VACANT. So, instead of mitigating their own loses, they would rather forgo rental income, tenant payment of utilities and upkeep for the sake of creating vacant houses. "A vacant rental is more marketable" "We're not in the real estate rental business"

I guess it's just collateral damage...innocent renters getting caught up in a mess not of their own making. It's a real tragedy, regardless of who is at fault for a rental going into foreclosure.

Jeff

Jeff Endress wrote:I guess it's just collateral damage...innocent renters getting caught up in a mess not of their own making. It's a real tragedy, regardless of who is at fault for a rental going into foreclosure.

Jeff

Jeff

Collateral damage yes, but not unplanned.

Like the spikes in a claymore mine.

The effect was to clear huge tracks of land, quickly, easily, efficiently.

FWIW


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Jeff,
Your idea sounds wonderful and simple. I understand banks don't want to be landlords, but if more banks did this and hired management companies, they would at least get partial payment after costs AND the value of the home would not plummet as it does when it is empty.

This is a time for communities everywhere, but especially in this part of the country, to brainstorm, think outside the box, get committees going, and do whatever it takes to not let homes be abandoned and all of our property values suffer. I think the mayor in Cleveland suing the mortgage banks is ingenious, whether he wins or not, it brings attention and accountability to those banks.

DL,
I too am very impressed with this journalist!

Jim,
Don't you find it odd that we are considered to be such a progressive and intelligent country as a whole, but while all this was going on, happening, for months and months, leaders did nothing. After the fact some newly elected of course are trying damage control. But I am in awe that this
complete meltdown of the housing market went on for so long, with new banks and brokers popping up, unregulated, uneducated, and virtually with a license to topple the housing market in this country one house at a time.

This could have been prevented. This is the country we need to be fighting for.

Jeff -

What you are saying is smart and logical.

The financial institutions have not been either of the above. It's almost like there is a plan to totally ruin urban structures.

It makes no sense. Banks are supposedly for-profit entities and all these types of activities seem to be counter productive.

Maybe people can live in their $600.00 tax rebate.

Justine Cooper wrote: Don't you find it odd that we are considered to be such a progressive and intelligent country as a whole, but while all this was going on, happening, for months and months, leaders did nothing. After the fact some newly elected of course are trying damage control. But I am in awe that this
complete meltdown of the housing market went on for so long, with new banks and brokers popping up, unregulated, uneducated, and virtually with a license to topple the housing market in this country one house at a time.

This could have been prevented. This is the country we need to be fighting for.

Justine

Why would they prevent something they wanted to have happen?

This is the country we need to be fighting for.

However, the writing was all the wall. spending like a drunken sailor on things not needed or that one could really afford was foolish.

For "them" to expedite it borders on evil.


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Justine Cooper wrote:I think the mayor in Cleveland suing the mortgage banks is ingenious, whether he wins or not, it brings attention and accountability to those banks.
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On balance I think suing the lending because the borrow failed to pay a debt is bad public policy. I am not sure how the lawsuit will play out but the first result of the lawsuit is to make getting a mortgage in Cleveland nearly impossible. What will that do to the housing market?

Justine Cooper wrote: complete meltdown of the housing market went on for so long, with new banks and brokers popping up, unregulated, uneducated, and virtually with a license to topple the housing market in this country one house at a time.

This could have been prevented. This is the country we need to be fighting for.

A couple of disjointed thoughts:

The PD article stated that over the last five years as many as 5,000 mortgages in the County may have been fraudulent. That amounts to 3% of the mortgages originated in Cuyahoga County. That's hardly enough to affect the broader market. Even assuming all of the fraudulent mortgages led to foreclosure. With 60,000 foreclosures over the last 5 years that means at most 8% of the foreclosures are the result of fraud. What about the other 92%?

Many of the fraudulent mortgages were FHA and VA mortgages. What responsibility does the federal government have for the damage done to communities like Slavic Village? The Cleveland Housing Network is stuck with hundreds of foreclosed and non marketable homes. Is CHN a criminal organization? Can neighborhoods sue CHN because CHN can't sell its vacant housing stock?

In the last five years or so housing values in California have gone up 100%. Last year they went down 10%. Why is a 90% increase in real estate values an economic tragedy?

If the government is going to be in the business of insuring 20% increases in real estate values shouldn't every homeowner be guaranteed that type of return? Why just California and Florida? Why not Detroit and Cleveland?

The best solution is to let housing prices tumble to their true market value. Any attempt to keep the bubble growing will result in a larger problem in future years.

Of course if the feds feel the need to prop up housing values I will expect my elected representative to make sure that Cuyahoga County gets a piece of the action. Guaranteed 20% annual growth in real estate values! Sweet!

Bill

Your comments would be completely legit, except for the pattern.

There is a systematic pattern, to the predatory lending practices, they have been traced right back to the Federal Reserve's lending practices.

http://www.youtube.com/watch?v=Nv0FXUgQJZQ

If it were random, I would agree, but it is not.



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Bill,
I usually appreciate your numbers and many of your posts, but I would love to know where you get your numbers. The number of foreclosures due to fraud is much higher, or there wouldn't be state and city officials suing banks and brokers. Federal loans were not the majority of the fraud either. There are so many elements to this mortgage crisis, that going back and forth once again is not worth the energy. For me, I will let the empty houses, the housing values of our houses, the PD and other articles actually interviewing people in it, not just reading half the facts, do the talking.

To quote CA like that shows how much you miss the point. Their houses were so inflated many couldn't afford to buy. Yes now they are going down, but it will take awhile for the realization that people who bought while high, won't be able to sell, and they will see higher foreclosure rates. It will never, ever hit there like it is here.

Because we don't have anything to attract people to this area!!!! Weather? No. Jobs? No. Schooling? No. To keep housing alive, you need to attract people. We, unfortunately, let Cleveland dissipate before our eyes. Let the schools get worse and worse. Let the flats and riverfront district die a painful death. Cut the cops and firemen in Cleveland. Allowed weapons to get in the hands of anyone! And when it all filters to Lakewood and nearby areas, we all wonder what is going on. Add to that the fraud and predatory lending, AND THE COMPLETE LACK OF THE GOVERNMENT TO LEGISLATE FAIR, HONEST AND EDUCATED BROKERS AND BANKS YEARS AGO and what do you have? Look around my friend. We are all in it, all affected by it, and all have to work toward any solution to reverse it.

Justine Cooper wrote:... investors from other states are buying up homes for $1!!!

Is there any good that can come from this mess?
Is this a good time for lakewood and cleveland to buy up the foreclosed properties to add to a land bank? I know the cities have no money but if houses are selling for pennies on the dollar we could find some cash,maybe private and public to build a land bank for development in the future. Why should outsiders buy up the forclosures only to make money on them in the future? or worse just forget about them and let the neighborhoods deteriorate more.

As far as the fraudulent loans that went through the FHA, obviously someone dropped the ball.

The brokerage that I trained at and quit was employing shady sales people and they were telling us that "this" was okay to do. And "that" was okay to do. Telling us everyone fudged the numbers. Telling us to divert direct questions about terms. Telling us to flip pages and confuse and saying it really helped the clients.

We were told to "Close the deal". Period.

The FHA is culpable as much as anyone else. No one was watching the hen house or they just didn't care because they had a different agenda.

Remember the $700.00 toilet seat the Pentagon paid for?

Justine Cooper wrote:Bill,
I usually appreciate your numbers and many of your posts, but I would love to know where you get your numbers. The number of foreclosures due to fraud is much higher, or there wouldn't be state and city officials suing banks and brokers.

The number of 5,000 possible fraudulent loans was from the PD article and was for the last five years and for Cuyahoga County alone.

I agree that fraud is an important part of the problem but only a small part. My political DNA demands that I blame the Feds.

The Federal government's housing policy of the last 30 years was based on the assumption that everyone should own a house and that banks should make a special effort to loan money to people with little income, no down payment, no assets and no idea of what is involved in home ownership.

On the other hand I am disgusted that the lead guys at Citibank, Merril Lynch etc who lost their companies BILLIONS of dollars get to keep their $100 million bonuses.

The whole concept never made sense to me:

"Individually these mortgages are worthless. However, if we bundle them together as an investment instrument, sell them as bonds to banks on the basis of an income stream that will never flow all of those individually worthless mortgages become "The High Yield Secure Real Estate Investment Portfolio."

I have a little sympathy for the homeowners but no sympathy for the banks.

john crino wrote:

Justine Cooper wrote:... investors from other states are buying up homes for $1!!!

Is there any good that can come from this mess?
Is this a good time for lakewood and cleveland to buy up the foreclosed properties to add to a land bank? I know the cities have no money but if houses are selling for pennies on the dollar we could find some cash,maybe private and public to build a land bank for development in the future. Why should outsiders buy up the forclosures only to make money on them in the future? or worse just forget about them and let the neighborhoods deteriorate more.

Slavic Village Development Corporation has a plan where they try to make purchases of homes in foreclosure or that are abandoned and more or less land bank the properties. Most of these are very small houses on a very small piece of land, so what they try and do is add some property to neighboring homes or consolidate properties for green space, etc. They've been using sustainable growth practices for a very long time. So they'll knock down some undesirable properties and build fewer new homes in their place.

Some of their neighborhoods look like war zones with all of the foreclosed/abandoned homes. We must stop the bleeding.

Bill Call wrote:

Justine Cooper wrote:Bill,
I usually appreciate your numbers and many of your posts, but I would love to know where you get your numbers. The number of foreclosures due to fraud is much higher, or there wouldn't be state and city officials suing banks and brokers.

The number of 5,000 possible fraudulent loans was from the PD article and was for the last five years and for Cuyahoga County alone.

I agree that fraud is an important part of the problem but only a small part. My political DNA demands that I blame the Feds.

The Federal government's housing policy of the last 30 years was based on the assumption that everyone should own a house and that banks should make a special effort to loan money to people with little income, no down payment, no assets and no idea of what is involved in home ownership.

On the other hand I am disgusted that the lead guys at Citibank, Merril Lynch etc who lost their companies BILLIONS of dollars get to keep their $100 million bonuses.

The whole concept never made sense to me:

"Individually these mortgages are worthless. However, if we bundle them together as an investment instrument, sell them as bonds to banks on the basis of an income stream that will never flow all of those individually worthless mortgages become "The High Yield Secure Real Estate Investment Portfolio."

I have a little sympathy for the homeowners but no sympathy for the banks.

Well that's a start! When people blame only homeowners they miss the whole picture. If you read Sharon's post, that went on around the country and the truth is, uneducated people should not have been allowed to run or work in mortgages, outside of "real" banks that have had ethics over the past years. NOW we have to move forward and find solutions in Lakewood so that we never become Slavic Village.

And did you read in the PD how much money is now going into taking care of the houses that are empty, knocking them down, mowing the grass, etc.? So we have Cleveland schools that can't afford proper books and classrooms for the KIDS but now money is going into this mess. While I was driving around and noticing boarded up houses, I felt a real embarrassment thinking about my sister in Africa who is surrounded by people, children and adults, that don't have shoes, let alone homes. And here we are with boarded up houses???? Can you imagine the other side of the world visiting here and seeing that and what that makes America look like? There has to be solutions out there.

My teenage neighbor will be one of the brave teens sleeping outside tomorrow night to support the homeless and bring awareness. How tragic that we live in a world with homeless and with empty homes. I once read that God has always provided enough to our world, that while some are starving in one part of the world, apples are falling off trees and rotting in another part (Neal Walsh) and it really makes me think about the empty homes versus the homeless versus people living in huts in other countries. I just hope this country can find ways to save homes and get people in them.