Learning Center » philadelphia

Communities Give a New Look To Foreclosed Properties

Julie Parker — Wed, 08 Jul 2009 14:52:40 +0000

As the American real estate market goes through a tailspin, the number of foreclosures peaks. The consequences are there for everyone to see – banks taking over the foreclosed properties and the owners fleeing them. As a result, neighborhoods with vacant houses are a plenty in various counties. Crime is rampant in these neighborhoods. But now certain neighborhood associations are trying to give a facelift to these decadent areas.

Brown Kinloch says how Phoenix Hill area had once sported ugly rows of vacant houses. Crime thrived in the area but now the unsightly plots wear a new look, thanks to the neighborhood association. Even a small playground and a park have come up in the area. That gives the much-needed touch of green to an area that had degenerated into an abandoned neighborhood.

Kinloch, a renewable energy developer, says people were given to believe that new housing cannot be built inside Louisville. “But we have proved that it is not true. If the houses are affordable they can be sold too,” says Kinloch.

Not only Louisville, efforts to rebuild neighborhoods are on in several areas like Philadelphia, Pittsburgh, Cleveland and Detroit. Local governments and community groups are working hand-in-hand to buy land. They are also tearing down old buildings and erecting new ones in their places. Sometimes, a speck of green is being added to attract business into the area. Such welcome signs are becoming common now.

However, giving a new touch to a degenerated area is not an easy task. Above 1.2 million homes were foreclosed in 2008. This means there is a vast stock of bank-owned spaces in the market that has caused housing prices to dip. As people lost jobs, crime became rampant in many neighborhoods, says Alan Mallach, a non-resident senior fellow with the Brookings Institution.

Now the National Vacant Properties Campaign wants to pull out the areas from decadence. Both the government and private properties have joined the fight to reclaim cities. According to the group, there are millions of vacant properties in the region. Another million will be added soon as foreclosures keep on increasing. Mallach says that there will not be a turnaround in this situation soon. Louisville still has many abandoned homes and vacant plots.

Still efforts to renovate properties are on in full swing. The demolition budget has been doubled in Pittsburgh. The task is no doubt a big one in a city that has about 6,000 vacant houses and 24,000 plots.

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Foreclosures Shove Americans into a Debt Abyss

Julie Parker — Wed, 30 Jul 2008 12:07:35 +0000

The nationwide foreclosures have literally shoved the American people into a debt abyss. Irrespective of the reasons and circumstances, the financial crunch that has gripped the country has not spared the native or the immigrant, young or old, poor or the affluent. America\’s money lenders and brokers have acted the Pied Piper in leading millions of American public into the debt trap, who identify themselves with the miners of old, steeped in debt to the store and unable to repay. Each passing day witnesses several additions to the number.

Harrowing tales of distressed borrowers are splashed across the nation through the media and to the world. Diane McLeod was a valuable customer to her lenders. She was able to secure two mortgages at a time, with varying interest rates. With the fluctuating housing market trends and interest rates mounting to spark off the high rates of foreclosure, Ms McLeod began to stagger. She had a car loan to repay and a high cost credit card. Like any other American she was used to high living and spend more than she earned. She lived with her 20-year-old son in a small two bed-roomed ranch house in suburban Philadelphia and drove her car to work. She was separated from her husband and handled two jobs to fulfill her dreams, which she was doing until rates began to soar and medical emergencies left her drained. She defaulted on her mortgage payments and her credit card bills mounted. She was terminated from her job and left to ruin with her house in foreclosure and her reputation at stake. She was bombarded with calls from the house mortgage agencies, almost 20 times a day, trying to slap a foreclosure notice which she in utter frustration, refused to respond to.

Ms.McLeod represents the average American today. However her lifestyle was not totally to blame. The financial giants Citigroup, Capital One and GE Capital had begun to collect interest payments that accounted for more than 40% of her total income, adding thousands more to it as fees. These financial companies with their non-transparent loan policies that land borrowers in knee-deep trouble when things go awry, are also to blame.

In recent years, the practices that had boosted the American economy and acquired record profits for many banks for decades, have floundered and jolted the nation’s economic system in its entirety, spiraling defaults, losses and foreclosures, crippling the nation.

Battle Against Philadelphia Foreclosures

Julie Parker — Mon, 19 May 2008 13:43:09 +0000

By getting temporary freeze, Philadelphia has bared its fangs and is one up in the battle against foreclosures. The City Council allowed for enforcement of moratorium on house mortgages. The sales scheduled for April auctions were put off, said Curtis Jones, a city council person. He was one of the sponsors for the resolution and says that now his aim is to suspend the court auctions indefinitely. Economic justice is imperative so that people do not get thrown out of houses that are their homes.

The council legislation however is non-binding. It aims to give the residents time to work out alternatives with lenders. The Sheriff John Green as well as the Common Pleas Court President, Judge Darnell Jones gave their support for it to be implemented.

The legislation is not without precedent. In 2004 the City Council had called for the Sheriff’s intervention when 1,120 units were up for foreclosure sale. A stay was granted on the sales in Philadelphia. At the same time the Pennsylvania Department of Banking conducted a survey across the state. It was this study that has led to the passing of the legislation putting a hold on foreclosures.

In 1983 in another instance, the then Sheriff – Joseph Sullivan had successfully got a one year stay on approximately 300 units that were ready to be auctioned in the court.

A report released by ACORN says that 3,206 risky loans contracted in 2006 are likely to face foreclosure. Ian Phillips of ACORN commented that there is a difference between the suggested moratoriums this time and the previous ones. The former is the result of predatory lending and not a product of recession-like conditions. Considering the nature of the crisis strong intervention is necessary.

However Robert Levy of Mortgage Bankers Association of Pennsylvania holds a different view. He contended that it would drive the city lenders out and hike interest rates because of the risk involved regarding intervention from the authorities. In the long run this ‘onerous methodology’ will cause serious harm to the system. It is inevitable that this will take place when lenders are prevented from realizing their dues. Levy hastened to add that the association is keen to be involved in community programmes for financial education and counseling. He would also try to prevent the banks from leaving the Commonwealth of Pennsylvania as a reaction to these consumer protection efforts.

The Foreclosure Crisis Today is The Tip of the Iceberg

Julie Parker — Sat, 30 Jun 2007 08:17:55 +0000

Foreclosures in the subprime market have nose-dived. The news media are choking with information. The sub-prime was set up to help the low-income group or those with bad credit history.

But it is this group’s dream houses are crumbling like sand castles. But mortgage representatives as well as the Federal Reserve Bank have rushed in with the assurance that these are merely teething troubles.

Center for Responsible Lending opines that what is happening is just the tip of the iceberg. 2.2 million borrowers in the sub-prime group have either lost or will lose their houses within few years.

It comes down to the harsh statistics of one out of every five sub-prime borrower in 2006-06 being affected. The figures remain unmatched in the history of modern mortgage.

Till yesterday Philadelphia and South Jersey had seen appreciation in the real estate market with a climb of about 70% to 80% in the last five years.

For sub-prime owners this was a boon because if they defaulted in their installments they could sell their property. It would not only clear their dues but also leave something extra for the future. But the reverse is taking place. Foreclosures are increasing and property rates are falling.

In Philadelphia appreciation of property is at 5% against 14% in 2004 and 2005. This will lead to about 17% house owners to forfeit their property through foreclosures. Similar is the pattern in Camden region where the appreciation rate has plummeted from 16% to 6%.

Till now the comfortable appreciation rate had made the regions an oasis safe from the depredations of foreclosure. People without funds just could not get an entry. But the sub-prime strategy played upon the feelings of those who coveted rich houses. They fell for the trap with disastrous consequences.

The mortgage rates are temptingly low at first but begin to climb after two years. It is as high as a 45% increase. To add insult to injury, sub-prime borrowers who improved their credit and wanted to move onto loans with better terms had to pay thousands in penalties. Never has such fraud taken place in the prime mortgage market.

Some players in the mortgage field are optimistic that the market will automatically correct itself. But words will not fill empty hopes. Strong legal action based on common sense is the need of the hour.

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