60 Minutes: Banks Walking Away From Homes They Foreclosed — Why Can't You?

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CLEVELAND DEMOLISHES 1,000 FORECLOSED HOMES, 20,000 MORE SCHEDULED

Rokakis: “Very often a bank will take a property to the point of foreclosure, but won’t go to the sheriff’s sale, ’cause they don’t want that property. They don’t want the responsibility of the $8-$10,000 bill that comes with tearing this house down.”

Former County Treasurer Jim Rokakis says some banks have turned their backs on a blight they created.

Rokakis: “In a normal real estate market people are out looking for loans. In the perverse real estate market we created in this country, you know during the period 2000-2006 this wasn’t people looking for money, this was money looking for people. And that’s why so many of those loans were made without down payments and without verification of income. And I might also add, phony appraisals.”

WATCH THE SEGMENT ON CBS.COM

EDITOR’S COMMENT: Rokakis as County Treasurer was left to handle a problem that his city didn’t create, promote or want. The Banks were hell-bent to foreclose these homes and neighborhoods just like it across the country. NO, they couldn’t write down principal because that would create too big a loss. So they elected to take ZERO.

• In many if not most cases the homeowners struggled to meet the payments even though those payments were based upon a principal balance that was too high to begin with — thanks to fraudulent appraisals, as Rokakis points out.
• In many if not most cases, those same homeowners spent their last dollar of savings on a home that would ultimately be demolished because the Bank didn’t want it — the Bank just wanted to foreclose so that they could report a total loss to investors and thus avoid accounting for the money in the securitization scheme (see the movie, The Producers).
• In many if not most cases, the homeowner was trapped by the “moral imperative” of maintaining payments on a home to a Bank that didn’t own the loan and a Bank that would itself fail to make payments, perform basic maintenance and security, and keep the utilities going. So it’s OK if the Bank walks away leaving entire neighborhoods destroyed but its “immoral” if a homeowner walks out of a bad deal that the Banks knew was a bad deal from the start and were counting on to fail. Too Anxious to Fail applies to these banks more than too big.
• In many, if not most cases, the homeowner sought help and would have accepted a lower payment on a lower amount of principal to correct the distortion the Banks created when they gave the loans. Neighborhoods would have been saved, housing values would have leveled off, and investors would have mitigated their losses instead of having a complete loss — a loss the Banks created by false ratings and false appraisals.
• In many if not most cases, the money from insurance, credit default swaps and other credit enhancements had already paid down or paid off the mortgage but that information was and remains withheld from the homeowner. 

So there you have it. Entire neighborhoods with tens of millions of dollars of home value reduced to rubble, with NO money going to investors, and in fact, with fees offsetting the money that was due them — fees that were generated by banks and servicers pursuing a  business model that was completely contrary to the interests of any of the real parties in interest. THE MIDDLEMEN HIJACKED THE FINANCIAL SYSTEM AND WE STILL HAVE NOT GRASPED THAT FACT.

If anything corroborates the widespread criticism that the Banks and servicers were acting against the interest of investors and homeowners, this is it. These are cold calculating decisions as to which homes would be kept and which ones abandoned. We already wrote here about the number of tax collectors that are now foreclosing tax liens on homes that were foreclosed by the banks and servicers.

Abandonment comes in many forms. Our politicians are abandoning us — those who are fighting it out day by day to stay alive and put food on the table — when they don’t step in and put an end to this madness. If the Banks choose to abandon the homes after they have reduced the value themselves, then they should be held accountable for each and every time they committed an illegal act in doing so. 

CLEVELAND TREASURER: THIS WAS A CASE OF “MONEY CHASING PEOPLE”

(CBS News)

Across America, recession-fueled foreclosures and plummeting home values have left countless properties abandoned and vulnerable to looting. As Scott Pelley reports, the problem has gotten so bad in Cleveland, Ohio, that county officials have demolished more than 1,000 homes this year – and plan to demolish 20,000 more – rather than let the blight spread and render nearby homes worthless.

The following is a partial script of “There Goes The Neighborhood” which aired on Dec. 18, 2011. Scott Pelley is the correspondent. Robert Anderson and Daniel Ruetenik, producers. See the full script or watch the segment by clicking the links above.

Chances are the home you’re in isn’t worth what it used to be. You may not have indulged in the real estate bubble with its liar’s loans and Wall Street greed, but you were stuck with the bill. Home values have dropped so far, so fast, that nearly 25 percent of mortgage holders today owe more than their house is worth.

And with unemployment so high, so long, many face foreclosure. If you thought your home value couldn’t drop any more, have a look up and down the block. You might say, “There goes the neighborhood.” The new threat from the great recession is the sudden surge in the number of abandoned houses. Vacant homes have become so ruinous to some neighborhoods that one city, Cleveland, decided it had to find a solution.

Perfectly good homes, worth 75, 100 thousand dollars or more a couple of years ago, are being ripped to splinters in Cleveland, Cuyahoga County, Ohio. Here, the great recession left one fifth of all houses vacant. The owners walked away because they couldn’t or wouldn’t keep paying on a mortgage debt that can be twice the value of the home. Cleveland waited four years for home values to recover and now they’ve decided to face facts and bury the dead.

Why destroy them? Jim Rokakis, a former county treasurer, showed us.

Jim Rokakis: We’re looking at a neighborhood that has almost as many vacant houses awaiting demolition as there are houses with people living in them. We have one here. One here. One here. One there.

Rokakis is leading the effort to tear down thousands of abandoned homes because they’re rotting their neighborhoods from the inside out. It often starts, he told us, when a vacant house becomes an open house to thieves.

Scott Pelley: It’s a nice house from the roof to about here. And then down here it’s been ripped to pieces. What’s goin’ on?

Rokakis: Well this is typical because this is as high as they could reach without using ladders. They ripped off the aluminum siding, which you’ll see on most of these houses. The aluminum and the vinyl siding comes off. It’s getting’ about a buck a pound.

Pelley: Essentially foreclosure scavengers have been through here?

Rokakis: The thieves have gone high tech. They know when evictions are occurring ’cause they’re posted online. And they will follow the sheriff. They’re usually there that afternoon or that evening.

Rokakis: So, in here, what you’re gonna see, well. I guess they took everything including the proverbial kitchen sink, right? The sink is gone. The plumbing is gone in this house. All the copper. Anything metal that had value is gone. The furnace is gone.

Pelley: The light fixture–

Rokakis: Light fixture came out–

Pelley: Is gone. How often is this happening in Cleveland?

Rokakis: This happens every day. And the foreclosure crisis creates this spiral, because as a result of this people are now more likely to leave neighborhoods like this. And as they leave, the scavengers come in and do the same thing to the house next door or across the street.

To make the house next door, worth more instead of less, vacant land created by demolition is often given to the neighbors, and sometimes turned into fields or gardens.

Tags: 60 minutes, appraisal fraud, bankruptcy, borrower, Cleveland, countrywide, demolition, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, quiet title, rescission, RESPA, Rokakis, Scott Pelley, securitization, TILA audit, trustee, WEISBAND
Posted in bubble, Corruption, Eviction, securities fraud |