Judge May Hold Investors Responsible For Blight

fromWCPN

Edith Crum stands in front of a house owned by out-of-state investors that she wants torn down. i i

Edith Crum stands in front of a house, owned by out-of-state investors, that she wants torn down. Mhari Saito for NPR hide caption

itoggle caption Mhari Saito for NPR
Edith Crum stands in front of a house owned by out-of-state investors that she wants torn down.

Edith Crum stands in front of a house, owned by out-of-state investors, that she wants torn down.

Mhari Saito for NPR

At this point in the housing collapse, it's likely that many people have a foreclosed house on their street — an eyesore that just won't sell or, even worse, that no one keeps up anymore. In Cleveland, one judge is testing out a somewhat radical judicial tactic that could help some of those homeowners.

On a quiet street on Cleveland's southeast side, 74-year-old Yvonne Means has a carefully manicured yard and a garden. What really gets this retiree upset is not her sickly collard greens; it's the house across the street. When that house sold in 2004, Means had her own house appraised. It came in at $70,000. Means didn't sell her house, but the one across from her went into foreclosure. Now you can barely see the boarded-up windows because the shrubs are so overgrown. Means had her own home appraised again last spring.

"[N]ow it's priced at $50,000. ... And I really don't invite my friends over. I'm just ashamed of my street now. I really am. You know, the houses ... that are not kept up," she says.

Court Takes Action

Means and her neighbors recently received letters from Cleveland Municipal Housing Court Judge Raymond Pianka telling them that one of the former owners of that empty house, mortgage giant Fannie Mae, had been found guilty of housing code violations. As part of its remedy, the court ordered the company to pay restitution.

Thursday, Pianka will hold a hearing to determine whether neighbors like Means can prove they suffered economic loss because of the house that Fannie Mae owned.

Emory University School of Law professor Frank Alexander says it's an unusual move for a housing court judge.

"Criminal law has long afforded the possibility that a criminal defendant who is found guilty can be ordered to pay restitution to a victim. What is unusual in this case is that the victim[s] are the adjoining owners, who did not initiate the lawsuit necessarily. This lawsuit was initiated by the city," Alexander says.

To complicate matters, an attorney for Fannie Mae says the property was supposed to have been transferred to Aurora Loan Services in 2008, before the violations were written up. But the paperwork was not filed until last spring. A Fannie Mae spokesman says that on Thursday the company hopes to clear up who owns the house. Pianka also sent similar letters to neighbors of another rundown Cleveland house that's now condemned. The defendant in that case is a Utah-based company called Go Invest Wisely LLC. Company officials did not respond to requests for comment.

'Overstepping' Bounds?

Robert Triozzi, the city of Cleveland's law director, says the proposed restitution hearings may help frustrated homeowners. "It is an appropriate recognition that other people, other than the city itself, [have] been harmed here."

But in an editorial, Cleveland's The Plain Dealer wrote that Pianka's restitution hearings risk "overstepping the bounds of impartiality." And legal experts point out that neighbors can already sue negligent owners through nuisance or trespass laws. Others worry that restitution claims could scare off much-needed investors.

Some Cleveland homeowners will be closely watching the restitution hearings. The defendant from Utah, Go Invest Wisely, also owned a dilapidated and graffiti-covered house a few doors down from Edith Crum.

"They buy up the houses, then they go live somewhere else in beautiful mansions, and we're stuck down here. It lowers the property value and what can you do?" Crum says.

Crum and her neighbors are working with a group of local housing activists to try to get the property condemned. And depending on how Thursday's restitution hearings go, Crum says the group may also head to housing court for its share of any restitution money.

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