DawgTalkers.net Forums DawgTalk Tailgate Forum Where Cleveland Went Wrong (Foreclosure article)...

I thought this was a pretty interesting read. Take from it what you will. Oh yeah, and I'll nip in the bud the people that will pick out the part about the Escalades, etc. While I don't excuse people who brought this on themselves, I think we'll all agree that there are a lot of people who were really mislead about things by people who should have known better. JMHO

Where Cleveland went wrong

It's too easy to blame the city's housing collapse on Rust-belt economics. How bad government and greed made it one of the nation's foreclosure capitals.

By Les Christie, CNNMoney.com staff writer
November 13 2007: 3:16 PM EST

CLEVELAND (CNNMoney.com) -- As the Treasurer of Cuyahoga County in Ohio, Jim Rokakis spends a lot of his time trying to deal with Cleveland's foreclosure crisis.

When asked recently just how bad it is, Rokakis unfurled a six-foot by four-foot Cleveland city plot map. Each lot was covered with dots of red ink where foreclosed homes filled the plots. From a few feet away, the map looked heavily freckled, while some neighborhoods nearly melted together in crimson masses.

Foreclosures hit Cleveland early and hard. By the summer of 2007, it had four of the top 21 ZIP codes for foreclosure filings in the United States. According to RealtyTrac, the city's 44105 ZIP, known as the Slavic Village, was the hardest hit U.S. community with 783 filings.

What made Cleveland the nation's foreclosure epicenter?

Like most rust-belt cities, it's suffered serious economic setbacks. The city lost jobs at more than three times the national rate during 2001 through 2003 and has not had a meaningful recovery since, according to Richard DeKaser, chief economist at Cleveland-based mortgage lender National City Corp. The state of Ohio recorded a quarter of all U.S. manufacturing job losses since 2001.

Add considerable population shrinkage: With 450,000 people, Cleveland has fewer than half the residents it boasted in 1950, when only six cities in the nation were larger.

Still, Rokakis and others don't buy the "It's the economy, stupid," explanation.

All over the state, even in prosperous communities, foreclosure filings at least quadrupled in 70 of the state's 88 counties over the past 11 years, according to Zach Schiller, of Policy Matters Ohio, an economic think tank. "They grew even when the economy was doing better," he said.

According to Rokakis, Cleveland got hammered because lax governmental oversight from the state allowed Wild-West lending. "No one was watching," he said. "There was no sheriff in town. The state legislature was dominated by banking interests."

Cleveland tried to enact local anti-predatory lending ordinances in 2002, but national lenders then abandoned the market, according to Mark Wiseman, who heads the Cuyahoga County Foreclosure Prevention Program, which is part of the county treasurer's office.

One bank representative, speaking under condition of anonymity, said the ordinances would have put local lending criteria well above and beyond the national standards. The lenders wanted no part of that.

Wiseman said banking lobbyists got the state legislature to nullify the local ordinances. Until this year, Ohio was one of only two states that did not include mortgage borrowers in their consumer protection statutes. And when the state passed anti-predatory lending laws in 2006, the punitive damages part of the law was gutted during the lame duck legislative session at the end the year.

The latest effort to rein in the mortgage industry is a compact drawn up by the governor and state attorney general's office last Spring. It asked that lenders, who helped create the predatory lending crisis, help keep Ohioans in their homes.

The plan's relatively mild provisions include such steps as notifying borrowers about resetting adjustable rate mortgages (ARMs) six months in advance. But, according to Paul Richman, senior executive for government affairs for the Mortgage Bankers Association, too many of the other compact provisions were unworkable.

The plan required servicers to pay incentives for mortgage workout counselors to encourage them to find solutions that kept people in their homes, mandated specific staffing levels and required dedicated caseworkers for each client so borrowers would always have a specific contact person to call.

And, there was a question as to how much legal weight the document carried. None of 20 mortgage servicers and lenders targeted have yet agreed to sign on.

For Rokakis, this long-term lack of accountability enabled lenders to continue to make bad loans virtually unchecked. These included many subprime, hybrid ARMs, also called "toxic ARMs," products he considers predatory.

Rokakis told of a 78-year-old Cleveland woman recently saddled with an unaffordable, 30-year ARM arranged by her minister, a mortgage broker. "I asked him why," said Rokakis, "you would give an elderly woman an ARM. He said, 'She wanted the house.'"

Roakakis shook his head. "I want a date with Uma Thurman," he said, "but you have to be realistic."

The lending industry views subprime, hybrid ARMS, not as inherently predatory, but as credit-repair products that give risky borrowers affordable rates, enabling them to establish credit worthiness and then refinance into fixed-rate loans.

But for many financially inexperienced ARM borrowers in Cleveland, and across the nation, it didn't work that way. Some didn't understand how much their adjustable payments would rise. They also encountered difficulty when they wanted to refinance, especially as home prices stagnated.

Some loans were untenable from the start, granted based on applications with no documentation from the borrower. Consumers, urged by mortgage brokers and other originators, sometimes fudged their own figures. In others, reports indicate that mortgage brokers simply forged papers to win loan approvals.

But even the staunchly pro-consumer Rokakis admitted that predatory lending victims are not entirely blameless for their own problems.

With times hard, "People were looking for a way to make a living," he said. "There were all these 'Buy real estate with no credit and no down payment deals.' The way to wealth was real estate."

Speculation took off, and expectations ran wild before they were dashed.

According to Mark Seifert, executive director of the East Side Organizing Project, which provides foreclosure prevention services, his staff used to look out the window just before groups of troubled home owners were due in to attend counseling sessions.

"We'd see Escalades, Range Rovers, Cadillacs out in the parking lots" he said.

Now Rokakis's office is dealing with the aftermath. "One guy came in wanting Wiseman's help to save 12 separate properties," many of which he bought on speculation, entirely on credit with none of his own cash invested.

He's not the only one. Now that prices have been falling for the past couple of years, far too many homeowners have found themselves in the same boat. Now the only option they have is foreclosure.

link

Also see: 25 real estate markets poised to fall

very good article 79. this crushed many of my family of carpenters, builders, property holders etc. theres nothing for me back there in ohio, my arse is gone!

The same thing that happened with the stock market in the late 1990's is the same thing that happened with the home owner market. There was a big boom due to favorable circumstances, and a whole bunch of people who had no business owning stock/owning a house and had no idea what they were doing, jumped in on it thinking they would get rich quick.

Back in 1998 or so, I was worried about the market coming down because it had been soaring for so long and other people were acting as if the market would never go down, it would only go up. Around 2004, I was telling people that the housing market was going to come back down, and people were like ... "it's real estate, it never goes down." It's like deja vu all over again.

If anybody wants to learn from it, they should look back at the 2001-2002 stock market. Now is probably a good time to start investing again in houses. Sometimes I think the best thing to do with investing is do the exact opposite of the general public.

I don't know man......for me....I stuck a chunk of change in a Swiss account my wife and I have, and have bought 15 lbs of gold over the last 10 years ...I want something when things go down the crapper.

That is real gold....something I can put in my hands....not a slip of paper.

Wish I had bought more to be honest.

Predatory banking and a buy now, pay later mentality has us in a pickle.....US banks are in for a big, big jolt over the next year or so...if anybody still has stock in those....I would dump it in the morning.....it isn't coming back anytime soon. Time to cut the losses.

I don't even want my money in the darn things other than what I have in a debut account to cover my monthly bills.

I myself wouldn't invest in houses right now.....nobody is going to be able to buy them unless you are talking high end houses.

Hate to be the bearer of bad news, but the u.s. economy is tanking as we speak. Not many know how bad it is, but we will all find out within 2 years. Those of you that are debt free, stay that way - put off buying on credit. By all means, buy things - just pay for them in cash.

For those in debt up to their rears, get rid of debt. Pay it off, sell things, cut back where you can. Like I told my wife, it's better to do it now and keep our house than it is to keep everything for now, and lose it all in a couple of years.

Oil is going through the roof, and that will hit every person and business in existence. Add in the pol's saying "we will take from this group, in order to give to this group".........you know, the whole political game.....it will bite us all in the ass sooner rather than later.

Hate to be Pauly the Pessimist, but there is no easy way out of the financial mess this country is in - and no, it's not Bush that caused it. Perhaps he added to it, but he didn't cause it. This has been coming our way for 50 plus years. As soon as americans felt they were "entitled" to things is when it started. That goes back a long way.

I won't even say "my generation" is going to pay for it. Why? Because if you are alive now, and will be in 5 years, age doesn't matter......we're all going to pay. The retired people, the working people, the 30 yr. olds, the 10 year olds, and everyone in between.

The day of getting something for nothing should never have happened, but it did, and it became the "in" thing. The game's almost over.

More or less, that is what I said.

The USA isn't a good investment right now, and isn't in position to be one for some time..

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The day of getting something for nothing should never have happened, but it did, and it became the "in" thing. The game's almost over.

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You are so right. So many people think that the government owes them a living, health care and housing it baffles the mind. Corporate welfare is just as responsible.

My wife is a Mortgage Broker.. and she'll be the first to tell you that one of the big problems is that lenders were willing to give loans to people that just weren't good credit risks.. they were also willing to give loans without requireing verification of income or assets.. Basically buying homes on nothing more than a signature.

These are called Sub Prime loans or B, C or D credit risks loans.

While My wife did a few of them over the last 15 or so years, she's mostly dealing with folks that go the traditional route.. You know... save up a decent Down payment, have good jobs, pay thier bills on time thus they have a good credit rating.. In other words, "A" level credit risks.

Two years and 4 months ago, my wife predicted a housing slump brought on by various things, but she felt at the time that the biggest hit our area was going to suffer would come from foreclosures..

I guess she gets the prize for being right...

She talked me into selling out condo in Aurora because she felt it would never be worth more than it is right now,, at least not for 4 or 5 years.. she predicted a total drop in home values... again, she was right.

We got out in good shape.. but the guy we sold it to got nailed when he was transfered for his job and had to sell it... he lost a bundle.. (the good news for him is that his company helped him recoup some of those losses)

So here we sit,, Just like Peen in a sense.. No Debt,, got cash (invested in very very safe things) and dual incomes... We really are the lucky ones and it's all because my wife saw it coming...

Whew.....that was a close one.

At some point people need to take responsibility for their actions - whether that is the shady mortgage brokers out there or the people signing on the line. No one forced any person to sign on the line for these mortgages.

Unfortunately every so often we see the markets weed out the weak hands, but if you play your cards right you can make quite a bit of money during these times. See the stock market in 1987, 2001 and now housing.

A couple quotes from Warren Buffet that I like:
"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it."

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

http://www.brainyquote.com/quotes/authors/w/warren_buffett.html

I've seen this coming also, Within the last two years, I've eliminated all my debt, or atleast down to $ 1,500 except for monthly bills. house is paid off in 4 years, truck already paid off, will be good for another 5years before I need another one, so Were sitting pretty good,

$1500 on a card or something like that is nothing.

Even $15,000 is nothing anybody can't work out of....the problem is 30k in card debut and a home you paid 180k for that you can only sell for 130K .....that is a problem for the person and the banks...they have potentially billions of dollars worth of real estate people are in essence going to just turn back in to them.

Over the next 2-3 years, banks are going to take a bath.

You can see it in their practices. If you deposit a check from another bank....even local....they now hold that money as long as the law allows before they post it where in the past it was posted almost right away.

They want to hold the money in their account as long as possible to draw money there....and in the hope that by holding the money 3 days, they can get people to bounce a few checks....which they cover no doubt, but are able to charge the $30 NSF fees.


Bastards.

I hadn't bounced a check in 25 years...by them doing this with a few divided checks, I bounced 2 in about 3 months some time back. One check, on an insurance settlement, was held for 10 days.

I went to the bank to find out the problem, and the local branch mgr told me there was nothing she could do...almost looking at me like she didn't care...actually she did look at me that way..

I told her I was going to close the account.....she pulled up the checking account which at the time had about 4k in it....she said she would print the check...again with this who gives a S look on her face.

I then gave her the number to an investment account I also had with them that needed to be closed. Then she seemed to care....all of a sudden fees could be waived.

All of a sudden I was the one with the 'I don't care" look on my face. She couldn't even close the thing without getting Charoltte(home office) involved.

Too bad missy.

The last $ 1,500 will most likely always be thereit's hte old pay off & charge thing every month, but after my divorce 7 years ago and have around $50,000 in credit card bills handed to me i've realized anybody can cut thier debut if they try, it's not fun and there are alot of do withouts, but we lived....LOL..


now we have almost no debt and with our modest incomes were both middle of the road income wise, we can continue to save more on retirement accounts monthly, and go places & do things without worring about not being able to pay the heating bill this winter.

In some ways, you don't want to be totally debut free. And for reasons of cash flow, there is nothing wrong with having a credit card or two with a $3000 or so limit on both.

The key is you manage the process, and it sounds like you have that under control.

j/c

The housing market is in trouble. No doubt about it. And for short term investments (read < 10 years) it's not a wise time to put anything in. But for the long term, the time is here. If you've taken care of your credit, and have a decent salary/income then you could realize a significant net worth increase. Property values are down, interest rates are going down (to try to "save" the market, which will fail) but will still be good for the savvy investor who takes care of his/her bills. The mortgage will be payable if the buyer doesn't get greedy and rents/leases the building at an affordable rate. What that is really depends on the area and the costs. But the opportunity is there.

One of the biggest problems is that the lending industry took on mortgages that the buyers couldn't feasibly afford. The buyers were not aware of the increase from the 5/1 ARM mortgages they were getting into with that super low introductory interest rate. They didn't plan on the rate going up like it said it would in the small print that nobody reads. They saw their monthly payment of $200 and thought "Great! We have all this "extra" money now and we got a house!" They didn't put the difference away to garner interest or to put toward a down payment to refinance in a year or two. Too many shortsighted borrowers and not enough education on how the process actually works. This is both the lenders fault as well as the borrowers. They should have read the fine print. Researched it. The borrower should understand every bit of the agreement and know exactly when the rates will shift and when to plan to increase (or decrease) the payments.

Personally, I bought my home in 2003/2004 and I was fortunate to have a awesome lender who listened to every question I had and took the time to explain it to me. Of course I was also asking a lot (and I do mean A LOT) of questions. I have the exact payments that are due for every month of my mortgage. I know exactly how much is Principal, how much is Interest and how much is required insurance at todays rates. I did the homework and I am fortunate to have a 30 year fixed rate loan at a incredible interest rate. The hard work payed off and will continue to pay off over the course of the next 20+ years.

I do agree that housing can be good as long as you have the time ..as you indicate, but if you plan on less than 10 years or so....forget it.

The mkt will be glutted for 2-3 years...maybe more...driving prices down further.....it will take a number of years to see any real return.

I absolutely agree. It's not for the short term. The "flipping" craze is gonna take a huge hit.

jc..

It's not just home buyers that acted with stupidity. But home owners that took out equity loans when their house's value jumped 50%, and since has dropped back down.

I know 2 guys here at work, that have lived in their houses for 10-15 years, but a couple years ago they took out equity loans for vacations, remodeling, cars, etc. And now that the housing market dropped, and of course our business directly affected(we sell building materials) they are losing their houses to foreclosure because they can no longer pay the mortgage and equity line.

My wife and I had been looking for another rental to purchase when the market took a sharp increase, and decided to hold out as it was obvious that you couldn't rent it and cover the mortgage, much less get it for a price that was worth the investment.

Now we are looking again, as people are selling cheap just to try to avoid foreclosure.

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Bastards.

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LOL That pretty much describes those blood sucking SOB's.....

We had a similar experience with a bank we were with for 15 years.... My wife and I had a savings account there and a IRA as well... I deposited a refund check.... (yeah,, Federal Tax Refund) for about 3 grand.. the next day I wrote a few checks to pay off some bills that I wanted to eliminate..

I get one of those notices in the mail that I was charged $33 for a bounced check..... and then the next day,, I got another.. I went ballistic...

Got to the bank,,, went into the managers office, closed the door and I think the look on my face lead her to believe this converstion wasn't gonna be pleasant... She was right!

She pretty much treated me like doggie do do until she realized that I was no piker and suddenly,,, she conceded that I was right, that a Tax Refund Check should NOT be held for any length of time... I received my $66 dollars back and life was calm again..

They used to try to do that if I deposited a Paycheck.... that lasted only ONCE... Just once.. Then I went to direct deposit.. and they never bothered me again about it..

With all these foreclosures, how soon before the banks start crying for a fed bailout? This could get real ugly before it gets better.

Most of the banks will survive fine. The larger banks still held to their normal lending practices, it's all these fly by night mortgage companies that started up in the last 5-8 years that are taking the hit because they just saw $$$ signs.

j/c


any of you use a VA loan? if so iv got a couple questions id like to ask from a non-biased person.