STEVE INSKEEP, host:

It's MORNING EDITION from NPR News. Good morning. I'm Steve Inskeep.

RENEE MONTAGNE, host:

And I'm Renee Montagne.

No one has a better view of the mess caused from the subprime mortgage crisis than a city mayor. And today, the U.S. Conference of Mayors releases a report on the economic impact of that crisis. It predicts home foreclosures will continue to rise. Real estate values will continue to fall, and the pain will spread to both jobs and spending especially in the hardest hit states - Ohio, Indiana, California, Florida and Michigan.

Detroit's mayor Kwame Kilpatrick joined us from his office in city hall to talk about how his city is faring.

Mayor KWAME KILPATRICK (Democrat, Michigan): This affects people across ethnic and race lines. It affects people across economic lines. There's 8,000 foreclosures in Oakland County, which is top wealthiest counties in this country.

MONTAGNE: Now, that's Detroit. Still Detroit.

Mayor KILPATRICK: That's immediately adjacent to Detroit, you know? So this is not just an issue where you can target who was hurt by it which is why it's so hard to fix the issue.

MONTAGNE: What are the mayors talking about that they can do or have been doing to fix in their own cities the problems that have been brought by the subprime mortgage crisis?

Mayor KILPATRICK: Well, mayors are pretty much coming together around three priorities; One, how we get to our constituencies, our various constituencies around the country and say, first, reach out to your lender. We have to get borrowers to call when they are in trouble. So we see that as a major issue.

The second thing is neighborhood deterioration. Once a house goes into foreclosure, can there be some type of standardization from banks and lenders on how they prepare property to be shut down or empty because a lot of times, the broken-window theory starts. We know people that want to buy the home. We have someone that wants to move in, but we can't get in touch with the lender to get those people into that home. And what happens is this starts to deteriorate. Somebody breaks the windows. Somebody goes in a back door. Somebody steals the air conditioning unit. And a lot of time, these are people who know that the house is foreclosed on. These are not the, quote, unquote, "common criminals." These are professionals. And that is a big issue for us.

And then lastly, the biggest issue is how we work with the industry to restructure loans that are already existing. What we found out by working with the industry is they don't want the houses. And borrowers really feel that banks want to take their homes. So how do we get the borrower and a lender to work together so they can restructure many of the loans that are out there?

MONTAGNE: Let's focus for a moment on your city - Detroit. You must have whole neighborhoods hit by this.

Mayor KILPATRICK: Yes.

MONTAGNE: Were it not, perhaps the downtown, the very small number of very expensive condo units, but the rest of the city.

Mayor KILPATRICK: Well, I disagree. I mean, Detroit has the largest, most expansive middle-class community in the state, which is often missed when we have these conversations about the city of Detroit. The largest, most contiguous middle-class community in the entire state of Michigan is in Detroit. But at the same time, we have a tremendous issue with neighborhood deterioration when it comes to the foreclosure and subprime issue. And it's a double-edged sword. You know, you have people that want to live the American dream that don't have the necessary credit points and the score that they need. And so you do need additional assistance. But then when they get it, predatory lending preys on particularly ethnic communities in this country. And so what we're doing is trying to use best practices from mayors around the country to see if we can start to remedy the issue.

MONTAGNE: Are there one or two examples you could give us of opportunities that have been presented to Detroit - a silver lining, if you will - by this crisis?

Mayor KILPATRICK: Well, I think one of the things that's really been shaken out this crisis is that a lot of those companies that were the headliners - that were the examples of predatory lending - have gone out of business. You know, so who you have left really are those good lenders that want to stay in business and they're now acting different. Even businesses like Countrywide, which were, you know, stated as being leaders in this whole subprime mortgage industry. And now, going back and doing individual borrower relationships in restructuring loans. And so we've been at the forefront of that in Detroit. We're not taking this on the chin. We're not laying here. We've been very aggressive and tenacious about getting out there and doing some different things.

MONTAGNE: Mayor, thank you very much.

Mayor KILPATRICK: Thanks a lot, Renee.

MONTAGNE: Kwame Kilpatrick is the mayor of Detroit.

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