Foreclosure Sales Double in County

Cleveland Free Times - January 12, 2005

Officials, study cite predatory lending as the chief culprit
By Joshua Greene

Cleveland Free Times

JUST LIKE EVERY OTHER Monday, at the Cuyahoga County Sheriff’s Foreclosure Sale on January 10, 50 homes changed hands. The room was packed with vultures, the speculators, redevelopers, bankers and small-time investors.

“I don’t think there’s this many people at a football game,” one bystander commented to another.

Half of the crowd came looking to make a good investment, while the other half was just hoping to get some of their investment back.

“The majority of the people here are looking for a steal,” says Donald Neff, a suburban real estate redeveloper who’s been at the game for 30 years. He says despite the fact that it’s a sheriff’s sale, the properties listed these days are bringing in big money. The Broadview Heights piece he came hoping to pick up for his daughter sold for $450,000. The bank ended up with that one, but Neff says he made an important contact and might still make the buy.

Neff says in the last few years, but most significantly in just this past year, the housing market has shifted.

“It’s a buyer’s market,” he says, attributing the glut of homes on the market to the abundance of easy credit extended to Americans this past decade. “People are generally overextended. Credit’s been fairly simple to obtain. Most people are reliant on two incomes. When one of them loses their job, the first thing that goes is the house.”

Evidence supports his claim. A study authored by Zach Schiller at Policy Matter Ohio called Home Insecurity 2004: Foreclosure Growth in Ohio, states that in 2003 “county sheriff departments put more than 36,425 foreclosed properties up for sale.” This number “represents a 26 percent increase from 2002 and a 57 percent increase from just two years earlier.”

In Cuyahoga County alone, there was a rise from 2,093 foreclosed properties for sale in 2001 to 4,421 auctioned off in 2004.

The data compiled by Schiller shows that while the majority of foreclosures happened in Ohio’s most populous counties, almost all the counties experienced growth in this area. Schiller says when he was doing the research for the study, he surveyed individual county sheriffs to find out the primary reason behind the rash of foreclosures.

“A majority, 31 of the 57 who answered, said predatory lending,” Schiller says.

In Cleveland Councilman Kevin Conwell’s Ward 9, at least one house now stands abandoned on almost every block, he says. He too blames predatory lending.

“It’s the predatory lending tsunami, it’s tearing up our city,” he says. “They’re killing my neighborhood. A lot of my residents just walked away from their houses.”

Conwell tells the story of a man named Mr. Williams. (“In our community, we just call the older people mister and missus,” Conwell says, explaining why he can’t remember Williams’ first name.)

“Mr. Williams … just walked away from his house on 131st and Edmonton and moved to Florida. He qualified for a second mortgage to redo his basement, but he never even got the basement rebuilt.”

The man got in so deep he just walked away, Conwell says.

“Almost every month there’s a flood of these leaflets and flyers. It’s predatory lending, but the people need money,” Conwell says.

Keeping track of the abandoned houses by the less-than-scientific method of knowing how many overgrown lawns need to be mowed, Conwell says in the last year, neglected properties have risen from 70 to 140 in his community.

“You could drive down almost any street and somebody ends up abandoning their house. Soon people begin dumping their trash in the yard. Raccoons and skunks move in. It’s affecting our quality of life,” he says.

George Zeller, senior researcher for the Council for Economic Opportunities in Greater Cleveland, says the big news is not necessarily that foreclosures are up, but that the economic downturn is no longer isolated in the city.

He says that despite urban myth, recent research his council has done shows that 85 percent of the job loss in Cuyahoga County since 2000 has been in the suburbs. Additionally, 88 percent of the manufacturing jobs lost have been in the suburbs. Cuyahoga County has lost about 64,000 jobs in the last four years. As of the week ending January 1, when 1,843 new unemployment claims were filed, Cuyahoga County was still losing jobs. Zeller says that in 1999, when the county was gaining jobs, there were 1,647 new claims for that same week.

“What most people don’t realize is that the biggest layoffs of the year happen during Christmas and New Year’s,” he says.

Along with the sky-high rate of foreclosures and evictions, the no-jobs syndrome means people aren’t paying their taxes either, Zeller says. “This is the biggest delinquency rate the county’s ever had.”

Executive Assistant to the Auditor Destin Ramsey concurs. “The number of people that are late or just not paying has risen considerably,” he says. “It’s higher than in the past. This is one of the worst we’ve seen. It’s pretty bad.”

Ramsey says this can’t help but affect services in the community. “Property taxes pay for a lot of different services. The Metroparks. Tri-C. Health and Human Services. The hospitals,” he says. “We rely on property taxes for an awful lot.”

The county sells delinquent tax cases to an outside credit collector and, according to Chief Deputy Treasurer Robin Darden-Thomas, is paid dollar-per-dollar for the debt. Despite common lore, she says the collector can and will eventually foreclose on the property. She tells the tale of a woman who came in to pay her back taxes only to find out that someone else now owned the property.

“She lost her home and didn’t even know it,” Darden-Thomas says. “Someone had purchased the property and hadn’t even contacted her.”

The extension of easy credit in an unstable economy isn’t the only reason for economic turmoil, but it’s the primary one.

“People get divorced, overextended, they lose their job or die,” says one Cleveland foreclosure lawyer, who requested anonymity. “My office handles the entire state. You see it all over the place. People want a lot of things. They stretch themselves too thin.”

The lawyer adds that despite the popular misconception, even the banks are losing money right now.

“The banks lose big on foreclosures,” he says.

Which is ironic, because it’s the banks who fought to keep State Sen. Tom Robert’s (D-Dayton) anti-predatory lending bill from becoming law. His legislative aide, Erin Davis, says what sunk the bill was that it didn’t exclude enough of the big money institutions from the prohibitions against shady lending.

“They’re not necessarily the types of institutions that we have problems with, but a lot of them have subsidiaries involved in sub-prime lending, which sometimes is construed to be predatory lending,” Davis says.

He adds that the senator will try again, this time clarifying an exclusion for the big banks. Davis says the other missing piece to the puzzle is that real estate appraisers are unregulated. If an appraiser arbitrarily raises the value of a home, a homeowner could then borrow more money against that overvalued home, and again get in over his or her head.

On its way to rectifying a situation the state can’t seem to handle, Cleveland passed its own anti-predatory lending law, touted as one of the most consumer-friendly laws in the land. But again, it’s the big banks taking the case all the way to the state Supreme Court. The law, Cleveland Codified Ordinance 659, was thrown out in Common Pleas Court, reinstated by the Court of Appeals and currently stands in limbo on its way to the high court.

The economic problem isn’t limited to homeowners.

Mike Foley, director of the Cleveland Tenants Organization, says he constantly hears from landlords who say their tenants just can’t afford to pay rent.

“We’re dealing with one problem, one issue, and that’s just a killer. The income base is just not there,” Foley says.

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