Speeding up Foreclosures?

[Lynn Farris]

During the last election cycle, everyone seemed to express concerns and plans to help people stave off foreclosures. Hilary talked about it, Obama talked about it, even McCain had a plan similar to FDR's,. The Sheriff in Chicago refused to evict people. Often it was the landlord and not the renter in many cases that was being put out on the street. Almost everyone has sympathy for people facing foreclosure on their home - all except the politicians in Lakewood the last I heard. They wanted to fast track foreclosures and get people who had some financial problems out of the city faster.

This has caused a real problem in real estate as it lowers home values.

I wonder and I pray that with all that we have heard, the politicians in Lakewood may have become a little more sympathetic if not to the plight of people that have lost jobs and are now looking for new ones - at least to the fact that they are lowering the values of their own homes.

What is the current thinking?

[Bill Call]

What is the current thinking?

Speed up the foreclosures.

The person who bought the house they couldn't afford gets to move into an apartment.

The foreclosed house is sold at a steep discount to:

A. Someone who did not buy a house they could not afford but waited until an insane housing market fell back to Earth

B. An investor who buys a house that had a mortgage for $150,000 for $50,000. The investor can then afford to make the major improvements needed to make the $50,000 worth $110,000 so the new purchaser can afford to put in another $20,000 in improvements so that you end up with a house that really is worth $150,000.

C. Nobody buys the vacant foreclosed property because it is not worth the land it is sitting on which allows cities to buy them on the cheap in bulk so that millions of obsolete houses can be torn down and replaced with new neighborhoods.

If your going to turn the mortgage business into just another welfare program your are going to do great damage to the entire country. But since that is the policy of the new program the question becomes:

How do I get a piece of the action?

[Lynn Farris]

Bill,

The person who has a home that they have lived in for years that should be worth 100,00 can't sell it now because foreclosures just like it are going for $50,000. How does that help Lakewood? What if everyone should got their property reassessed at the new lower level - I notice that the County is not reassessing this year becuase of this. But people can petition I believe to have their property reassessed. That will lower the amount the schools get and the city as well.

And why should the Rich guys that talked people into refinancing their homes with this crazy schemes get our bailout and the homeowners in Lakewood get left holding the bag.

This doesn't affect just those "people who bought a house they couldn't afford" it affects the people who may have refinanced to pay off medical bills, or to pay for college bills or to take care of their aging parents or to get by when they lost their job in the auto industry. For almost a year, we got calls and e-mails constantly telling us about the great deals we could get refinancing.

But the important point is the mortgage crisis and foreclosures also affects the people who has done everything right by making the value of their home, for most their most valuable asset decrease significantly. That is absolutely not fair. Who will buy a house for the full value, when they can get such amazing deals with these foreclosures. I pity anyone who has to move for a job right now.

[Lynn Farris]

Bill by the way I love debating with you. But I have another question for you.

Say you bought a home in Lakewood for 100,000 five years ago. Because of the number of foreclosures that home is now worth $50,000. Are you financially foolish to keep paying that loan or should you default and buy a new one for $50,000 saving yourself most likely a bundle of money. And is that good for Lakewood or our economy?

[Ed FitzGerald]

Lynn-

I may be wrong, but I'm assuming that you reached your conclusion by taking something out of context.

Cuyahoga County Common Pleas Court began an initiative this year to address the huge backlog in foreclosure cases. As you may have read earlier this year, the county's foreclosure docket was one of the slowest in the country and had become something of a scandal.

The clogged foreclosure docket wasn't helping people stay in their homes- it was contributing to houses being vacant while the owners waited for a long-overdue hearing. Lakewood is participating in this initiative like every other community in this area, so that vacant properties don't remain in limbo indefinitely.

Meanwhile, our local housing initiative was presented at the last City Council meeting, and will be printed in the new issue of the Observer. Included in it are more foreclosure prevention and assistance programs than the city has ever provided. In addition, this week we are contacting hundreds of local residents who have subprime mortgages, to offer assistance before foreclosure hits them.

I'll post our housing initiative here this week, and would invite your comments and/or suggestions.

[chris richards]

Here's a thought on the current houses in foreclosure.

Why doesn't the city of Lakewood put in place a Case Study House Program similar to that of the mid20th century? Encourage local architecture firms, and/or architecture students to design affordable green housing that can be privately or publicly funded. This could replace or renovate the current aging housing stock, increase the desirability and increase property values within the city.

For more info on the original Case Study Program: http://www.artsandarchitecture.com/case.houses/

[Lynn Farris]

Thank you Mayor for responding.

My information is old and I have complained about it before, that Lakewood was trying to get foreclosures accelerated and I have discussed it with my councilman. I did hear the County Treasurer discuss this last year at a Democratic Club meeting and both Don and I left appalled. Neither Don or I weret aware that this acceleration only applied to vacant homes and perhaps at that early point in the disucssion it did not. However the other problems from foreclosures are real.

I am hopeful Lakewood's new program will address many of these problems. I am anxious to see it and I am very appreciative that you make this type of information easily available.

After posting today, I received e-mails from people in Lakewood who have experienced trouble in this real estate market where their home values have fallen 50%. These are great citizens that have done every thing right and kept their property up and now are seeing their largest asset falling drastically. That does not bode well for property tax receipts either.

Some people told me that they had gotten their bank to agree to a short sale which was the only way they could get out of an upside down mortgage. They were forced to sell, but in no way could compete with the homes on the market that were selling for half of what their home was worth and what they had paid. They were fortunate their bank worked with them, but that isn't the case with everyone.

[Lynn Farris]

Mayor,

Maybe you or someone else can also address the issue of foreclosures of condos of which Lakewood has many on the Gold Coast.

I will admit, I am making assumptions here based on hear say, so perhaps someone can clear this up for everyone.

Many of the condos are experiencing upside down situations, it is my understanding. It is also my understanding that many of these are in foreclosure. When a property is in foreclosure, the bank is not required to make the maintenance fee. Therefore, the fewer owned units require the maintenance fees to go up for all existing residents, or the condos to forego needed maintenance.

Much of the maintenance fees go for electric or gas that is not separately metered in some of these buildings but are based on square footage. This may make the situation even more serious for the people that are currently living there. The value of the condos are down and the maintenance fees are up. It is obviously in Lakewood's interest to keep these buildings filled. So perhaps this is a special challenge in the whole foreclosure issue to address.

[Bill Call]

Many of the condos are experiencing upside down situations, it is my understanding. It is also my understanding that many of these are in foreclosure. When a property is in foreclosure, the bank is not required to make the maintenance fee. Therefore, the fewer owned units require the maintenance fees to go up for all existing residents, or the condos to forego needed maintenance. ........................................................................................

So perhaps this is a special challenge in the whole foreclosure issue to address.

The Gold Coast cannot compete with government financed downtown condo development. The State and County are prepared to spend tens of millions of dollars to subsidize apartment and condo development in the Flats and along Euclid Avenue. The potential buyers of those properties are the people who might buy along the Gold Coast. Instead of buyng the Gold Coast condo they buy the government subsidized condo. The Plain Dealer calls this "revitalizing the City".

In an area with a declining population government financed development simply sacrifices one neighborhood to develop another. Lakewood is paying a steep price for that type of government action.

Lynn, trying to prop up home prices by artifically inflating values is the wrong solution.

[Jim O'Bryan]

The Gold Coast cannot compete with government financed downtown condo development. The State and County are prepared to spend tens of millions of dollars to subsidize apartment and condo development in the Flats and along Euclid Avenue.

Bill

The number I have heard is closer to $6 billion going into various Cleveland projects.

Not tens of millions.

Also being offered are 10-30 year tax abatements.

The regional dream?

FWIW


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[Lynn Farris]

So Bill, I hear you it is a conundrum.

So what do you suggest? I really haven't heard any positive suggestions from you other than punish the little guy for having the gall to invest in America (or Lakewood)? We aren't talking about speculators here - of course we bailed them out. We are talking about the average middle class American Family who has played by the rules and have now just lost half of their investment.

For example, why do the banks not have to pay a maintenance fee on condos that they own? (If indeed this is true?) Hey our tax dollars bailed them out and they didn't go along with the program of loaning that money or lowering interest rates to the consumer. In fact interest rates are now higher and part of our problem in the market in general and the auto industry in particular is the credit crunch.

Perhaps our planning department needs to figure out a way to fill the condos and apartments on the Gold Coast with young people who use few municipal dollars and who contribute to the city's income tax base. They could use some incentives and an agressive marketing plan. These condos were a good bargain before - now they are an unbelievable bargain.

The city of Lakewood needs to work to fix the problem not because it is the moral thing to do to help the citizens which it is, but because without it, they will not have tax revenue from income tax from the people living here and the schools will not have property tax, because the value of the property is declining. So in their own best interests, it is critical that they figure out a solution to the problem and I am eager to read Mayor Fitzgerald's proposal.

[Jim O'Bryan]

For example, why do the banks not have to pay a maintenance fee on condos that they own? (If indeed this is true?) Hey our tax dollars bailed them out and they didn't go along with the program of loaning that money or lowering interest rates to the consumer. In fact interest rates are now higher and part of our problem in the market in general and the auto industry in particular is the credit crunch.

Lynn

I cannot believe that no one has to pay for the service/maintenance fee when Deb and I lived there we heard horror stories the other way about what building management would do to collect the fees.

As for Ed FitzGerald Housing Initiative it is in the new Observer out today and online. I had reason to speak with Mayor FitzGerlad last week about another project AGS is working on, and he was pretty up on what is going on. I had been in meetings with civic leaders on the eastside where they had asked about the foreclosure rate in Lakewood. I mentioned I thought we were holding our own compared with cities around us. One mentioned it will be much worse and why. Mayor FitzGerald was well aware of some of the problems about to hit Lakewood.

While the initiative makes sense I do have some questions about some of the players.

FWIW


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