The Cleveland Plain Dealer has the special investigative report:
The city of Cleveland has aggravated its vexing foreclosure problems and has lost millions in tax dollars by helping people buy homes they could not afford, a Plain Dealer investigation has found.
The city provided mostly low-income buyers with down payment loans of up to $20,000 through the federally funded Afford-A-Home program, but did little to determine whether the people could actually afford to keep their homes.
That lack of oversight persisted for years, even as hundreds of loan recipients defaulted on mortgages, many within two years, the newspaper found by analyzing property and loan records covering the period between 2000 and 2007.
For example, nearly half of 584 homes sold by the top three for-profit companies that tapped into the program over the eight years have gone into foreclosure. More than one-third of those homes have sold at sheriff's sale or sit abandoned because banks did not take them back.
What makes that so costly to taxpayers is that the city has virtually no chance of recouping its investment once a property is sold at sheriff's sale.
The loss in Afford-A-Home dollars from failed purchases from Cresthaven Development Corp., Rysar Properties Inc. and Pebblebrook Properties Inc. thus far totals more than $2.3 million.
Presented with the newspaper's findings, city officials acknowledged problems with the Afford-A-Home program and ordered tighter eligibility standards for buyers and sellers.
And Tom Blumer at BizzyBlog correctly looks at the failure of 'government oversight' and the voters in the fiasco:
CRA mandated that banks originating first-lien mortgages extend them to undeserving borrowers, or face brutal challenges to their ability to continue in business during regulators’ audits and to other business moves such as mergers and acquisitions. As would be expected, short-term survival instincts overcame sound underwriting. Now, according to leftists, it’s the banks’ fault for doing what they were intimidated into doing.
But then, proving again that the term “government oversight” is usually an oxymoron, the city agency, even with no similar level of threat looming in the background, doubled down. Even if the apps were submitted by development companies who should have known better or were lying about certain key information (that appears to be the case in two sidebar stories Gillespie relates), that doesn’t excuse the complete failure of oversight, and absolutely doesn’t justify the program’s continuance on auto-pilot for many years despite obvious early-stage problems.
Many in Cleveland still persist on blaming someone else for why the city’s foreclosure situation is much worse that the vast majority of other cities in the US. Look in the mirror, guys. Every city’s bankers faced similar CRA problems, and to the extent they did what first-lien lenders in Cleveland did, you can hang the blame on Uncle Sam and CRA. But it’s Cleveland’s residents who elected the people who created the agency that threw federal second-mortgage money at people with apparently little if any concern over whether it would be repaid, ultimately turning entire city blocks into barren wastelands. Though it’s a popular claim among lefty bloggers in and around Metro Cleveland (maybe “Metro Mistake” is a more appropriate term), George Bush and the evil Republicans sure as heck didn’t do this.
I wonder what the the records in Toledo would show? As Blumer says, "Journalists there ought to get to work."
