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In Cleveland, Foreclosures Decimate Neighborhoods

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In Cleveland, Foreclosures Decimate Neighborhoods

Economy

In Cleveland, Foreclosures Decimate Neighborhoods

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SCOTT SIMON, host:

This is WEEKEND EDITION from NPR News. I'm Scott Simon. We were in the Slavic Village neighborhood of Cleveland the other day to do a story about the home foreclosure crisis, and the symbol of that story zipped right by the window: a car driven by Cleveland City Councilman Tony Brancatelli of the 12th Ward. It was a fire truck. The councilman told us to stay back, and he sprinted out to talk to firefighters who were going through a blackened, abandoned home.

(Soundbite of car door opening)

SIMON: What was that about?

Councilman ANTHONY BRANCATELLI (12th Ward, Ohio): Arson.

SIMON: Arson?

Councilman BRANCATELLI: We have now had well over 20 arsons in the past few months in vacant and abandoned properties, and it's - I feel bad for these guys. The firemen are going into these houses, putting their lives at risk because of an arsonist, and that's the scariest part.

SIMON: Abandoned homes can be sores that don't heal. They fester with fires, house gangs and drugs and drive values down for the entire block, block after block.

Mr. JIM ROKAKIS (Treasurer, Cuyahoga County, Ohio): You know, when you have thousands of vacant properties, you can't be surprised that some of these begin to burn. These vacant properties give people who have a reason to hide a place to hide, and there are thousands of them.

SIMON: Jim Rokakis is the treasurer of Cuyahoga County, Ohio, which has suffered 80,000 foreclosures since 2000, the most per capita in the country. The problem here is so huge, different people can make different explanations and all be right.

Back in the 1990s, Mr. Rokakis began to notice an alarming increase in the number of home loans to people that had no visible means of support. He flourishes a computer printout listing 15,000 foreclosures for last year. It looks thicker than the Cleveland phone book.

Mr. ROKAKIS: I would not want people to think that we talk about 15,500 foreclosures here, that we're talking about 15,000 homeowners. There were plenty of people who fall in the speculator category. They weren't homeowners. They were people who took advantage of the no money down, cash back at the close, and you will see these names come up over and over and over.

SIMON: I mean, I - just going over this printout that you have of some properties here, you have someone named - first name Deborah(ph) who owns at least three properties here, someone named Susan(ph) who seems to own one, two, three, four, five.

Mr. ROKAKIS: Susan probably received cash back on each of those properties at the close. The mortgage broker was probably a friend of hers. The appraiser was probably working in concert with them. The mortgage banker really didn't care because he knew or she knew that she was going to take these mortgages and sell them off to Wall Street. And until the bubble burst in sometime around October of 2006, it was a wondrous operation.

SIMON: Ivy Zelman, founder of Zelman and Associates, an equity research firm in Cleveland, cites another reason. One quarter of all U.S. manufacturing jobs lost in the last 10 years have been in Ohio. She says many people turned to their homes for cash.

Ms. IVY ZELMAN (Founder, Zelman and Associates): They were borrowing against their homes as an ATM machine, and then they started losing jobs, and then home values started coming under pressure. So I think that the lack of income growth in this market and the continued job losses in Ohio, couple that all with the mortgage liquidity, would be really the recipe for disaster.

SIMON: Zack Reed, Councilman of Cleveland's Third Ward, sees the foreclosure crisis beginning with major banks who refused to give home loans to minority families, a practice called red-lining. Mr. Reed says that 25 percent of his constituents are senior citizens. Many of them when to what are now called predatory lenders after asking banks for small loans to repair a roof or basement.

Councilman ZACK REED (Third Ward, Cleveland, Ohio): The bank said no. So when the predatory came knocking on their door or the person who sent you the thing in the mail that said hey, I've got a deal for you, you can get a $3,000 loan at no interest and whatever it may be, you know, the senior just needed to put a roof on their home.

And they put their home. Because they were on fixed income, they may have missed a payment or two. Well, they didn't read the bottom line that said that it went from zero for missing the payment to 10 percent. They missed another payment. Now it went from 10 percent to 20 percent. Now it's well out of their control.

(Soundbite of footsteps)

SIMON: Councilman Brancatelli walked us through an abandoned house in Slavic Village. It already smelled of rot. All fixtures, plumbing pipes, windows and wiring had been stripped from the walls. There was only a waterlogged teddy bear and a doll left behind. The councilman says he knows the couple who once owned the house.

Councilman BRANCATELLI: They were suckered, but they felt that they were sitting down and doing loans with a guy with a suit and a tie and a pen, and this was a big company, and they must know what they're doing if they're giving us all this money.

They didn't know what adjustable-rate mortgages were. They didn't know what balloons were, and they didn't know that their taxes and insurance and all this other requirements weren't part of their transaction. All they knew is they ended up seeing $800 and $900 payments show up that they couldn't make.

So what happened is the house went bad financially. They came in and foreclosed. The family was evicted, and what happened later is that termites came in to start to strip the house.

SIMON: When you say the termites, you're talking about people.

Councilman BRANCATELLI: Vandals, yeah, and it's a very lucrative business. These aren't just necessarily somebody trying to get a fix or a crack head. These are professionals who come in and strip these houses. We saw people in vans with high-powered equipment…

SIMON: Because, as the councilman explains, there's a high new demand for scrap metal for building booms in Dubai and China. Stripping a house is cheaper than mining.

Councilman Zack Reed sat in a community center in his ward to tell us about 144th Street, which has 25 abandoned homes.

Councilman REED: First of all, you've got a street where you've got a multitude of these houses are boarded up. Second of all, you've got drug-dealing on that street. So therefore, they take down the boards. They go in the house, and they do their business in those houses, selling drugs or doing drugs, doing crack cocaine, smoking crack cocaine, caught the house on fire.

So now I've got two houses on that street that are burnt out, where the roof is still not there, but it's still boarded up. You've got prostitutes who have taken over these houses. You've got little kids who've got to walk past and see the symbol of their community is boarded-up houses, and then you've got a young lady who talked to me the other day on that street who says Councilman, all I want to do is sit out on my porch and just enjoy a nice, summer day. That's all I want to do. She can't do it.

SIMON: Abandoned, burnt and stripped houses should be demolished before they attract rats, arsonists, criminals. Councilman Brancatelli says that about 200 homes were demolished in his ward last year, but about 1,000 should come down. That would cost $5 million, money which will not be spent on roads, schools or police protection.

Councilman BRANCATELLI: It's a crime because when you look at this house was occupied not too long ago when it was an affordable roof over somebody's head. Now we have to push it into the ground. I mean, this isn't Florida or Vegas or places where, you know, their values go from $500,000 to $300,000 and they lose equity. These are neighborhoods that we lose.

SIMON: And on another side of Cleveland, Councilman Reed says the loss of homes could decimate many neighborhoods and punch more holes into a city that's already staggering.

Councilman REED: Because if you lose a neighborhood like Mount Pleasant in the city of Cleveland, then you lose the city of Cleveland. These are hard-working individuals that I represent.

SIMON: I wonder, Councilman, how you respond to the argument that some people make that look what's happened to people who've been - had to lose their homes is tragic, but in the end, everybody has to be responsible for their own financial decisions?

Councilman REED: Well, most of my colleagues, they'll tell you that he is the closest thing to a Republican we have on the city council. I'm a very conservative councilman, but I know in this ward and in this community, these were individuals who got duped. I know they got duped because I saw it where I live at. I saw the flyers.

You know, you're getting inundated time and time - these are proud individuals, but there were a lot of individuals in the ward that I represent who just needed a little bit of money to maintain the house that they lived in so they could pass that household house on to their family members like we've done for generations.

SIMON: And the effects of foreclosures will be felt for years. Rick Wagner, who's housing programs manager for Cleveland Heights, which despite being a leafy, desirable suburb has also had increases in foreclosures, worries that those abandoned and stripped homes won't be purchased by people who actually want to live in them.

Mr. RICK WAGNER (Manager, Housing Programs, Cleveland Heights, Ohio): Most people today want to buy a house that they can move into. So who does that leave to buy these? Rehabbers or people that watch those late-night infomercials and think they can buy these bargains, fix them up and sell them.

SIMON: And Cuyahoga County Treasurer Jim Rokakis says that the decline in property values caused by abandonment will harm basic city services, including schools, police and fire.

Mr. ROKAKIS: I know that next year when we do the re-evaluations of these properties, there will be a hit to all the taxing subdivisions. The schools, the cities, the county will get less as a result of lower values.

SIMON: Mr. Rokakis keeps maps in his office that pinpoint each home foreclosure with a small, red dot. There are so many dots by now, it looks like huge bruises are spread across the whole of Cuyahoga County.

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