Tag Archives: Housing Crisis

Study: Housing Bust Turns Parts of Sun Belt…into Rust Belt

Frequent Rust Wire readers know we’ve written before about the housing crisis creating Rust Belt-like conditions in some Sun Belt cities, such as Las Vegas (See here and here).

Now there appears to be actual data to back that up, according to a study from the Research Institute for Housing America, a division of the Mortgage Bankers Association.

The Los Angeles Times explains:

“A traditional city in decline is one that has suffered a sustained population drop, leaving behind empty houses, apartment buildings, offices and storefronts. Cleveland and Detroit, for instance, suffered from the erosion of manufacturing and the loss of residents, who left in search of jobs.

Instead of eroding a particular industry, however, the housing bust left a glut of homes because of overbuilding and the foreclosure crisis. Follain (The study’s author) argues that the future of these cities is threatened in similar ways to that of Rust Belt cities.

‘Long-vacant neighborhoods are going to develop, and we can imagine what can happen,’ he said, including potentially higher crime and lower property taxes.”

Particularly hard-hit, are inland areas of California, this article says, as well as places in Florida and Nevada.

Read the study here.


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Fighting for Belva Davis in Detroit

In this video, Detroit residents rally to save their neighbor from foreclosure.

“The crime wave that is going on in this neighborhood is a crime wave by the banks that are evicting people unfairly instead of modifying their mortgages and doing everything they can to make sure they stay in their homes,” one neighbor says.

I wanted to note that the particular bank involved is Wells Fargo, one of the leading villains of the foreclosure crisis. In Cleveland this $25-million bailout recipient refuses to appear in court for code violations on its bank-owned properties, dragging down property values for responsible homeowners across the city.

Recently a former employee of this bank testified that its employees purposely steered black homeowners toward subprime mortgages although many times they qualified for prime loans.

Thanks to Nick Helmholdt of vacantpropertyurbanopportunities.blogspot.com for bringing this to my attention.

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Tips for Preventing Foreclosure

   The Brookings Institution has another fantastic report: Addressing Ohio’s Foreclosure Crisis. The research institution offers 10 ways to help prevent foreclosure and it’s certainly applicable outside the Buckeye State.



   Many of their recommendations are fees and regulations that level the playing field between borrows and lenders. This is, in my opinion, a particularly good point they make:


Simple fairness dictates that where a lender (or anyone else) takes actions that impose significant social and economic costs on innocent third parties, be they neighboring homeowners or local governments, they should not get a free ride at cost to the public—they should bear the burden of those costs, which are known as externalities.”


Here’s a short review:


#1. Get borrowers better information about their options, and

greater access to counseling, emergency assistance and loan modification opportunities.


Among the recommendations: Impose a $1,000 fee on all foreclosure filings (or certain categories of foreclosure filings, such as subprime loans), with the proceeds to be used principally to fund foreclosure prevention counseling programs and emergency assistance through the Home Rescue Fund.

                (This is one I particularly like because it alters the incentives for lenders against foreclosure. Because apparently, the near-worthlessness of many Cleveland/Detroit/Youngstown/Buffalo-area homes is not disincentive enough to seize property after property.)


#3. Create a fair foreclosure process, with ample protection

for borrowers and opportunity to negotiate with creditors.

    Brookings recommends rewriting the laws governing borrowing to provide more protections for consumers.

    “The foreclosure process is an extreme example of what is known as an “asymmetrical relationship, where the distribution of both available resources and potential costs are

highly uneven. Creditors have far more resources to pursue foreclosure than most debtors have to defend against it, while the consequences of failure to the debtor—loss of her

home, her assets, her credit rating, and often her health and family stability—vastly exceed the consequences of failure to foreclose that may be borne by the creditor.”


                Here is another sub-recommendation I like: Require plaintiff to complete a mortgage origination fraud “screen”; that is, a series of questions about the origination of the mortgage being foreclosed, at the commencement of foreclosure proceedings, in order to enable the court to evaluate the possibility that fraud or misrepresentation occurred in the course of originating the mortgage.



      Recommendation 11: Require that the entity initiating a foreclosure on a residential property be legally responsible for maintenance of the property in the event that the title-holder vacates the premises at any point after the initial foreclosure filing.

   Recommendation 13: Eliminate foreclosure as legal grounds for eviction of a sitting

tenant who is otherwise in compliance with her legal obligations as a tenant.


   Under current practice and law in Ohio, when a tenant-occupied residential property is foreclosed, eviction of the former owner’s tenant is automatic and all but immediate. Where the tenant is a responsible one, this makes no sense. A rent-paying tenant, who is in no manner responsible for the owner’s default, loses her home. An occupied property is rendered vacant, and in most cases, immediately begins to lose value and devalue

neighboring properties. The lender, who is now the new owner, suffers from the loss of the property’s value, and loses the opportunity to gain at least some cash flow from the

property while seeking a new buyer. Tenants should be allowed to remain in their home at least until expiration of their lease.













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