I swear, I'm really not trying to scare you people.
So... Here's a positive spin: As you read this, remember that it was the shift of low and moderate income people from the Democratic Party to the Republicans that helped usher in the era of conservative domination back in 1980. Remember too that although most urban areas are already heavily Democratic, suburban areas have only begun to shift heavily to the Dems in recent years.
Now then, from this morning's NYT:
SHAKER HEIGHTS, Ohio — In a sign of the spreading economic fallout of mortgage foreclosures, several suburbs of Cleveland, one of the nation’s hardest-hit cities, are spending millions of dollars to maintain vacant houses as they try to contain blight and real-estate panic.
In suburbs like this one, officials are installing alarms, fixing broken windows and mowing lawns at the vacant houses in hopes of preventing a snowball effect, in which surrounding property values suffer and worried neighbors move away. The officials are also working with financially troubled homeowners to renegotiate debts or, when eviction is unavoidable, to find apartments.“It’s a tragedy and it’s just beginning,” Mayor Judith H. Rawson of Shaker Heights, a mostly affluent suburb, said of the evictions and vacancies, a problem fueled by a rapid increase in high-interest, subprime loans.
“All those shaky loans are out there, and the foreclosures are coming,” Ms. Rawson said. “Managing the damage to our communities will take years.”
Cuyahoga County, including Cleveland and 58 suburbs, has one of the country’s highest foreclosure rates, and officials say the worst is yet to come. In 1995, the county had 2,500 foreclosures; last year there were 15,000. Officials blame the weak economy and housing market and a rash of subprime loans for the high numbers, and the unusual prevalence of vacant houses.
Foreclosures in Cleveland’s inner ring of suburbs, while still low compared with those in Cleveland itself, have climbed sharply, especially in lower-income neighborhoods that border the city. Hundreds of houses are vacant because they are caught in legal limbo, have been abandoned by distant banks or the owners cannot find buyers...
At greatest risk in Cleveland’s suburbs are the low- and moderate-income neighborhoods where subprime lending has soared. The practice involves lenders issuing mortgages at high interest rates for people with lower incomes or poor credit ratings, usually involving adjustable rates and sometimes no down payment and no investigation of the borrower’s circumstances.
“What makes the subprime mortgages so devastating from a community perspective is that they’re so concentrated geographically,” said Dan Immergluck, a professor of city planning at the Georgia Institute of Technology....
Early last year, James Rokakis, the Cuyahoga County treasurer, started a countywide foreclosure-prevention program, which pays community groups to educate people about loans and help defaulting borrowers negotiate with lenders.
In the late 1990s, Mr. Rokakis said, the flight of manufacturing jobs was the major cause of rising foreclosures but around 2000, the surge in careless lending began to wreak havoc.
Mr. Rokakis estimated that more than three-fourths of the current foreclosures in Cuyahoga County involved subprime loans, some of them blatantly unwise or dishonestly portrayed to buyers. Only last year did Ohio tighten its laws to require more complete disclosures to borrowers.
With so many homeowners running into trouble, the City of Cleveland has been unable to keep track of the number of vacant houses, said Mark N. Wiseman, director of the county prevention program. He estimates that 10,000 of the city’s 84,000 single-family houses are empty.
Here's Greenspan's take on the issue before the Senate yesterday:
Senators yesterday accused the Federal Reserve and its former chairman, Alan Greenspan, of a "pattern of neglect" that fostered a crisis in the mortgage industry that is putting more than 2 million families at risk of losing their homes....At one point, committee Chairman Christopher J. Dodd (D-Conn.) held up three large, blue charts demonstrating that the Federal Reserve was aware as far back as 2003 that lending standards were deteriorating.
About the same time, Dodd said, Greenspan was touting nontraditional mortgages, such as loans with adjustable interest rates that move upward after the first few years. "American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgages," Dodd quoted Greenspan as saying in a speech in early 2004.
Greenspan noted yesterday that he retreated from those remarks about two weeks after he made them, saying he meant that only "a narrow segment" of households might benefit from nontraditional mortgages.
Greenspan, who stepped down early last year, also took issue with Dodd's criticism. "To suggest the Fed was pushing subprime mortgages or even adjustable-rate mortgages is just not accurate," he said. "I was merely identifying an arithmetically obvious issue, that some mortgage borrowers, admittedly a very small segment, would do better with a different product. But I always viewed it as a very small segment of the mortgage market."
That's nice. He was Chairman of the Federal Reserve. He knew then, as he surely knows now, that the financial industry hung on his every word. But he was "merely identifying an arithmetically obvious issue." Are you kidding me?
Here's why I won't shut up about this:
The expansion of the lending industry was part of a nationwide push for homeownership. President Bush made home buying a cornerstone of his "ownership society." Homeownership is at a record 69 percent.
Now the real estate boom is unraveling, with about $160 billion in mortgages falling into delinquency, federal regulators said at yesterday's hearing. They added that as many as 1 million homeowners will see higher rates on their adjustable loans over the next year.
Anyone out there have any more data on how those 1 million ARM loans breakdown? How many of them were nontraditional and/or subprime? Please tell me that number counts only nontraditional loans. Please?
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