The cost of vacancy
When homes are abandoned, taxpayers are left with the billBy AMANDA SMITH-TEUTSCH / Tribune Chronicle
Article Photos
Fact Box
Demolished homes
Below is a list of Niles homes demolished using public funds. While the problem is not unique to Niles, this city has been selected as just one example to demonstrate the number of foreclosures by community.
2008
n 1324 Difford
Last owner: Ron Smith
Bank: Bank of New York
Demolition Cost to City: $3000 *reimbursed by mortgage company
Lost taxes annually: $1,600
n 161 First St.
Last owner: Wade A. Porter
Bank: Wells Fargo
Demolition Cost to City: $4,480
Lost taxes annually: $700
2007
n 519 Mason
Last owner: Charles Whittaker
Bank: EMC Mortgage Group/JP Morgan Chase
Demolition Cost to City: $2,142
Lost taxes annually: $500
n 101 Wood
Last owner:Kerstin Caudill/James Paxon
Bank: Deutsche Bank
Demolition Cost to City: $1,495
Lost taxes annually: $700
2006
n 173 W. First
Last owner: Michael Moore
Bank: Wells Fargo
Demolition Cost to City: $3,800
n 221 Williams
Last owner: David R. and Rhonda Davis
Bank: First Investment Company, later sold to Leader Mortgage.
Demolition Cost to City: $3,150
n 1915 Park Drive
Last owner: Evelyn Penezich
Bank: Wachovia
Demolition Cost to City: $2,500
Lost taxes annually: $450
n 135 W. First St.
Last owner: Alan and Susan Peden
Bank: Union Federal Bank of Indianapolis
Demolition Cost to City: $3,500
n 343 Pratt St.
Bank: Wells Fargo
Demolition Cost to City: $5,800
Lost taxes annually:$880
2005
n 31 Fairlawn
Last owner: William Ford
Bank: Bank of Oklahoma
Demolition Cost to City:$2,500
Lost taxes annually: $900
n 525 Iowa
Last owner: Edward Strohmeyer
Bank: First Franklin Financial
Demolition Cost to City: $2,800
Lost taxes annually:$500
n 318 Grant
Last owner: Wesley and Donna Elefritz
Bank: Bank One
Demolition Cost to City: $3400
Lost taxes annually: $400
2004
n 149 Mistletoe
Last owner: Charles and Patricia Campbell
Bank: Household Realty
Demolition Cost to City:$2,776
Lost taxes annually: $600
n 1134 Olive
Last owner: Monica Cox
Bank: Citi Financial
Demolition Cost to City: $1,700
Lost taxes annually: $250
Since 2004, 25 homes have been torn down by the city of Niles; 14 of them were vacant due to foreclosure.
Rell Petusky knows what foreclosure looks like. It looks like a large blue tarp stretched across a leaking roof. It looks like sagging downspouts, broken windows and a missing gas meter.
It looks like the vacant property next to his Belle Terre Avenue home in Niles, which has been foreclosed and is awaiting Sheriff's Sale if the city doesn't tear it down first.
''I think the agents who give these mortgages never come to look at the houses they're giving money for,'' Petusky said recently.
The home at 1767 Belle Terre Ave. was purchased for $68,000 on Feb. 17, 2007. Consumers Mortgage of Middleburg Heights loaned $58,667 for the property and sold the loan to investors. By Aug. 13, 2007, Citi Financial had filed foreclosure notices in Trumbull Common Pleas court.
Today, the house is valued at $39,000, according to the sheriff's appraisal.
The problem is not unique to Belle Terre, to Niles or even to Trumbull County.
As the nation's economy comes to grips with the credit crisis and resulting financial meltdown brought on in part by the foreclosure crisis that is sweeping the country, local communities are trying to deal with the aftermath of court battles and abandoned properties.
''I was in that house before it was sold, and it was in deplorable condition then,'' said Petusky. ''I couldn't conceive that anyone would have given a mortgage for it. I would have only valued it then for the land. And I don't think the man who bought it ever made a payment.''
After the owner drove away from the home, he left the taps running for more than a month, a city inspector said. Garbage was piled inside, and 3 inches of water remains in the basement, according to city housing maintenance code officer Stephen Yovich.
''There are holes in the roof, the downspouts need repairs, there are boarded up windows. I condemned it on May 19,'' Yovich said.
Last week, the City Housing Appeals Board ordered the 800-square-foot, 2-bedroom home torn down. If the owner doesn't appeal to county courts or tear down the home in 60 days, the city will do it and add the bill as a lien on the property. If added, the demolition lien will join the $58,667 mortgage lien, $2,700 in credit liens and a $50 bill for city grass cutting. It and six other buildings, some of them foreclosures as well, are in line for demolition.
The sheriff's sale of the home is set for Nov. 13. Yovich said if anyone wants to stop the demolition if it's granted, they can file an injunction in Trumbull County Court, as other property owners and lien holders have done.
''It doesn't matter when the sheriff's sale is,'' he said. His job, he noted, is to bring derelict and violating properties before the housing appeals board for remedy.
The Belle Terre Avenue property is one of 85,000 foreclosures filed in Ohio in 2007, according to the group Policy Matters Ohio, which tracks the foreclosure rates in the state. That's more than double the number of filings in 2001, when just over 41,000 were filed.
''AMERICAN DREAM"
As banks moved away from traditional, 20 percent-down, 30-year mortgages, more and more people purchased homes. Low and moderate income families, people with poor credit and no down payments, nearly everyone could purchase a home. Many couldn't afford the payments and quickly lost them.
Some of the mortgages offered had low teaser rates, and then reset with higher interest rates after a set period of time.
''Interest can increase by 2 or 3 percent,'' said Mark Graham, senior loan officer and senior vice president for Farmer's National Bank in Canfield.
That can significantly increase the monthly payment on a loan. ''That's a significant change in your debt service,'' said John Gulas, chief financial officer for Farmers.
As the mortgages were made, they were pooled together into securities, and many were sold from loan originators to larger firms.
''In that pool, there are some good loans and some subprime ones,'' said Gulas. ''There are defaults, and some that are still paying.''
As more mortgages went into default, the investments weren't performing as expected. Promises of large returns from high interest rates evaporated and the result has been the financial turmoil and bank failures seen in the country and across the world in recent months.
At Farmers, the bank largely steered away from what was seen as risky practices, said Graham.
''We took a more traditional approach,'' he said. The bank doesn't sell off its mortgages, for one, so if the loan defaults, it's a red mark on their books. That means they have a strong interest in making good loans, whereas an agent making a loan for a fee that is going to be quickly sold off may not have had such a strong incentive to make a good loan.
Also, when first-time home buyers come in, they are educated in debt-to-income ratio, the importance of putting money down and other financial planning tools.
''Our counterparts were giving loans at 100 percent financing,'' said Gulas. ''People were taking the loans and thinking, 'I can buy this much house, and the payment is the same as my rent. If it doesn't work out, I can just walk away and be out nothing.''
Farmer's didn't give those kind of loans, he said.
''Everyone has to have some sort of skin in the game,'' he said, meaning everyone had to put something down on their loans.
The bank has seen defaults, said Graham, but no more than they would expect to see in any other economically troubled time.
UPKEEP WHEN NOBODY'S HOME
When a borrower defaults, the bank must follow a certain process, Graham explained. The bank must work through the courts, and with the current backlog of cases on most civil dockets, that takes time, he said.
''We have a mortgage on the property,'' he said. ''We're not the owner. We're limited in what we have the right to do.''
When the homes they have interest in are abandoned, they take further steps, he said. The bank makes sure the home is secured against vandalism and is maintained on the outside, he said.
''Some of the larger, out-of-town lenders don't have interest in our real estate,'' he said. ''They're not going to take care of the properties.''
Niles city housing maintenance code officer Stephen Yovich said he has very little patience with most of the out-of-town banks that hold titles or liens to abandoned properties in the city. Many loans, he said, were given over the value of the house and many of the homes he's condemned or issued demolition orders for were not worth half of the liens he found.
''Instead of bailing them out, the Chief Executive Officers and other officers of these companies should be indicted for fraud, intentional misrepresentation and market manipulation,'' he said. Banks like Farmers, or Citi Financial, which hire firms to mow grass and secure houses, are few and far between, he said.
''I would say most of the companies I deal with are worthless,'' Yovich said. ''I send notice of demolition or condemning. They always call, from California or Iowa. And they say the house isn't that bad. And my response is always, Have you seen it? Have you sent a local company to take pictures or maintain it? I assure you, it is that bad.''
TAXPAYER COST
Over the last five years, Niles has torn down 26 houses at a cost of more than $100,000. More than half of those homes were due to foreclosure. The loss of property tax on the demolished foreclosures amounts to at least $7,500; that doesn't include delinquent taxes on the properties that banks have repaired or maintain, and doesn't include the charges for mowing weeds. Some of the foreclosed properties have bills of $1,500 or more for weed cutting, county records show.
In Warren, councilman Al Novak estimated that city has spent about $300,000 on home demolitions since 2005. Novak said, as long as there was no material in the house that needed to be remediated, the city can usually get a house demolished for up to $2,500.
Warren Community Development Director Michael Keys said there now are 20 more demolitions out for bid.
''It's safe to say that a majority have been foreclosed on,'' Keys said.
Niles city councilman Stephen Papalas, D-At large, said he's given himself a crash-course in mortgage financing and macro-economic implications.
''I'm trying to absorb as much as I can,'' he said. He said he was hesitant when he heard about the tax-payer funded $700 billion bailout to clear Wall Street books of bad mortgage debt.
''I think that our Congressmen fell asleep at the switch,'' said Papalas. "I don't think this ever should have occurred. Our leaders set inflated goals of homeownership, and put pressure on the banks to meet them.''
His idea of a banker, he said, was like long-time city leader Fremont Camerino, who retired from First Federal Bank, now First Place.
''As a banker, he was conservative, careful, and honest as hell,'' said Papalas. ''I thought all bankers were like that. But now I've learned there are too few Fremont Camerinos on Wall Street.''
Rell Petusky wants something done with the vacant, foreclosed and abandoned house on Belle Terre. A retired city worker, he's been watching the stock markets and political developments closely.
''I think the CEOs of these companies knew about the problems long ago,'' he said. ''People got mortgages who shouldn't have. People today have no such things as savings, and no money down to buy a house. They can walk away and they don't have anything to lose. They were brought up to believe the money is going to flow forever, and all of a sudden when the interest goes up, they can't make the payment.''
He said he feels intervention by Congress is necessary, "but the CEOs shouldn't walk away with millions."
Tribune Chronicle reporter Bill Rodgers contributed to this story.
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TBTBTB
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10-13-08 9:37 PM
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I'd rather have a sleazy President who doesn't destroy the economic base of the country versus a cokehead turned evangel who claims to speak to God daily whilst running the country into the ground.
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jcg868
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10-13-08 9:28 AM
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Go to*****moonbeam.
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anniemae
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10-12-08 9:36 PM
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Yeh, well Clinton was worried about his own JOB.......under the table with Monica.....
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TBTBTB
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10-12-08 6:37 PM
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The truth about the government is that they were all asleep at the wheel. This phenomenon is hardly two years old, yet the Dems in Congress do shoulder some of the blame for shortsightedness.
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OldManGrump2
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10-12-08 6:33 PM
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jcg - this all happened when the Repuke-icans had control of Congress for 6 years and let deregulation run wild. Don't blame the Democrats. Davis, McCain's campaign manager took $15000 a month to do nothing for Freddie Mac except lobby for less regulation. Just shut your mouth Repuke-ican !!!!
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TBTBTB
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10-12-08 3:23 PM
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Strict regulations go directly against most of McCain's stated policies, and have for years. He is admittedly a proponent of government deregulation and privitization. This financial crisis is a good example of failed deregulation, among other things. However, Congress/regulators/the President cannot shoulder all of the blame. Basically it boils down to greedy people asking for money they could not afford to pay back, and greedy banks giving out loans like Halloween candy. Had bankers and their clients been a little more forthright and less anxious, we'd not be in this mess. The country has been addicted to credit, living beyond out means, and a culture of consumerism for far too long. Not everyone will be able to own a home, as sad as it sounds. Just like not everyone is cut out for college, or the military, or a job in corporate America.
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letsgopens87
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10-12-08 2:29 PM
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Tbtbtb, you're absolutely right, but if there were strict guidelines in place to prevent people from getting loans who couldn't afford them, we wouldn't be in this situation. Mccain warned of this very situation two years ago, yet nobody in congress gave a crap, including everyone's hero, osama, oops, I mean obama.
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jcg868
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10-12-08 1:42 PM
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letsgopens87 - Thank you. I was just thinking the same thing. I'm a registered Republican but would certainly vote for a Democrat if I thought he/she was qualified. TBTBTB - I agree.
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TBTBTB
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10-12-08 1:23 PM
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Where is the blame placed on the people applying for loans and taking on mortgages they could not afford? There has to some personal responsibility in this.
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letsgopens87
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10-12-08 12:48 PM
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Good stuff jcg, so many people are completely uneducated on the candidates. They want to vote democrat because they want "change", yet 95 percent don't even know what "change" means and what they're voting for.
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jcg868
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10-12-08 11:24 AM
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Here's some more information: Go to White House dot gov. Then look for the article titled: Just the Facts: The Administration's Unheeded Warnings About the Systemic Risk Posed by the GSEs. For those of you who don't know, GSE stands for Government Sponsored Enterprise.
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jcg868
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10-12-08 11:13 AM
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Jesus... Human Events dot com. There.
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jcg868
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10-12-08 11:12 AM
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Forgot about not being able to post links... In that case, read this: Go to the website called HumanEvents**** then look for the article titled "McCain Letter Demanded 2006 Action on Fannie and Freddie". It was posted on October 10. Everyone needs as much information on BOTH candidates as we can get our hands on.
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letsgopens87
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10-12-08 11:00 AM
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Bill Clinton also had an opportunity to kill osama bin laden and he didn't do it. If he had some balls to drop the bomb when he knew EXACTLY where he was may have prevented some of the terror attacks that have affected this country's economic situation. I'm pretty sure if Bill Clinton was in office now that we'd have the same problems, so stop dreaming to think that Osama/Biden are going to come in and change the world. If you want socialism, move to Russia, let me know how that goes for you.
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letsgopens87
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10-12-08 10:58 AM
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Bill Clinton also had an opportunity to kill osama bin laden and he didn't do it. If he had some balls to drop the bomb when he knew EXACTLY where he was may have prevented some of the terror attacks that have affected this country's economic situation. I'm pretty sure if Bill Clinton was in office now that we'd have the same problems, so stop dreaming to think that Osama/Biden are going to come in and change the world. If you want socialism, move to Russia, let me know how that goes for you.
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letsgopens87
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10-12-08 10:53 AM
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you people are retards, congress is run by democrats, stop blaming the republicans for all the country's problems. The democrats should look in the mirror and realize its just as much their fault. McCain for President.
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jcg868
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10-12-08 10:47 AM
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If you are going to reply to me, please use correct grammar. Thank you.
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GiannasMama
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10-12-08 10:39 AM
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JCG YOU JUST A*****RETARD TO EVEN SAY THAT ARE U FLIPPIN SERIOUSE BUSH HAS BEEN THE ONE IN THE OFFICE FOR THE LAST 8 YEARS NOT A DEMOCRATIC , WE NEED A DEMOCRATIC PRESIDENT WHEN CLINTION WAS IN OFFICE WE ALL HAD JOBS AND THERE WASENT HARDLY AS MANY ABANDONED HOUSES
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jcg868
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10-12-08 10:22 AM
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This is exactly what happened under a DEMOCRATIC congress!!!!!!!!!!
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OldManGrump2
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10-12-08 7:40 AM
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This is exactly what happened under the 8 years of Bush/McCain and their DEREGULATION philosophy. Now we taxpayers have to pick up and pay for the mess they caused.*****the Repuke-icans for what they did to us !!!
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