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.
