Day of Action on Foreclosures: Occupy Homes Coverage, Talking with Neighbors and Relevant Studies

Imagine a natural disaster that hit the United States and internally displaced over 5 million families.  We’d understand that would require a major policy response.  But for the 5 million estimated foreclosures, and the millions more that are going to happen, there’s no response from the administration to match this challenge.  Enter the Occupy Movement.

Before we go into anything, I’d like to say that participating in #OccupyHomes in East New York, Brooklyn, yesterday was a powerful experience, certainly the best moment I’ve had with the Occupy movement, and if you get a chance to participate in (or better, start) an Occupy Homes event in your area, I’d highly recommend it.  Check out the 2m 30s mark on this video, where the child in the family that reclaimed the house looks out the window on the Occupy crowd below and runs to his family to say “everybody is here and they’re working for us!”  Wonderful.

There’s been a lot of great coverage of the events yesterday, and I’ll leave it to others.  For New York, I’d recommend reading Astra Taylor at the Nation, as well as Justin Elliott at Salon and Michelle Goldberg at The Daily Beast.

I don’t think we’ve heard enough from the neighbors of the abandoned homes that were reclaimed in these events.  I talked with one of the neighbors of the house that was reclaimed in East New York as it was happening, and he told me that the house had sat vacant for a few years.  Contractors doing nearby demolition work would come in the middle of the night and dump bags of garbage on the house’s front lawn because they knew it was empty.  There would be broken sinks, glass, bricks and other garbage that couldn’t sit there, since there were many kids in the area.  So the neighbors would have to get together and haul off the materials.

He also brought up that he’d have to shovel the snow in front of the place during the winter, since there were many older folks in the community as well, and the banks weren’t going to keep the sidewalks clear.  He expressed concern that someone with a chemical dependency could set up shop in the house.  As the neighbor put it, “what if at 1 or 2 in the morning the person’s drugs run out?  They step outside, and maybe an older person is walking by themselves down the street.  That could escalate into a bad situation.”  Or maybe a fire started, which spread to the roofs of the other connected row houses?  The Occupy crew that went in to clean the place found extensive black mold – the banks left the place to rot.

The neighbor was very happy to have new neighbors in that house who would help upkeep the property and be members of the community.

And he should be, because he’s right to be concerned about crime and abandoned housing.  A 2009 Urban Institute report that summarized the costs of a foreclosure to a community reviewed several studies on crime and foreclosure.  According to a police study, “In 2005 and 2006, there was an annual average of 1.7 violent crime incidents per 100 houses in high-foreclosure clusters, almost three times the 0.6 average for the comparison group.”  Another more carefully constructed analysis, Immergluck and Smith’s The Impact of Single-family Mortgage Foreclosures on Neighborhood Crime, found that “a standard deviation increase in the foreclosure rate (about 2.8 foreclosures for every 100 owner-occupied properties in one year) corresponds to an increase in neighborhood violent crime of approximately 6.7 per cent.”

As a recent GAO report on the cost of foreclosures to communities found, “Increases in crime related to vacant properties could also lead to greater population loss and difficulties in neighborhood revitalization strategies. Once a block or neighborhood contains a critical number of vacant properties, the loss of population is likely to continue, further undermining the investment in a community and reducing the revenue base to support local services in those neighborhoods. One local community representative stated that vacant property problems can tip a neighborhood into decline and contribute to a loss of neighborhood worth or spirit.”  Given how many arrests are made in the name of preventing “broken windows” and neighborhood “disorder”, wouldn’t it make sense to also stop-and-frisks the banks behind these foreclosures?

Housing is the bedrock of a community, and as neighborhoods are hit by unprecedented waves of foreclosures the normal means of keeping government services going are collapsing. Take this study released by Minnesota Neighborhoods Organizing for Change, The Impact of Foreclosures on the Minneapolis Public Schools, which found “There have been more than 13,000 foreclosures in Minneapolis since 2006, with an estimated loss of 4,000 students in the Minneapolis Public Schools (MPS), resulting in almost $150 million less in state funding to the Minneapolis Public Schools.” Services aren’t able to handle the disruptions of actual bodies from communities that we are seeing as a result of this crisis.

And then there’s the cost to communities themselves. The Urban Institute study found the price of a foreclosure to the municipal government as follows:

At $20,000 a pop, three foreclosures is a teacher’s salary. Some of this cost is decreased revenue.  But some is increased expenses.  The city might have to step in to secure and conserve the property.  They may have to deal with increased police calls and fires.  Given what a mess the Occupy team that first went into the building found and had to cleanup in a house in the center of a set of row houses, these things aren’t abstracts.

Indeed, the whole community seemed happy to have Occupy in their neighborhood.  I wasn’t sure if it would be weird with the racial disparities between most of the occupiers who showed up and the community, but the community welcomed us.  People honked their car horns and gave a thumbs up.  I overheard people from the community passing by tell each other that we were there to fight foreclosures, and there was a lot of “thank you!” and “you go get them!”

Minority communities understand the stakes.  As Center for Responsible Lending (CRL) found, “Approximately one quarter of all Latino and African-American borrowers [who originated a loan from 2004-2008] have lost their home to foreclosure or are seriously delinquent, compared to just under 12 percent for white borrowers.”  And according to CRL, without intervention we are only halfway through the foreclosures that will happen – without the government doing something this will continue.

And there are plenty of somethings to be done.  If you want to go Federal with the bankruptcy code, a special Chapter M bankruptcy is an option – a standardized pre-packaged bankruptcy plan. The plan would be based on HAMP modification guidelines – 31% DTI – plus cramdown to address negative equity.  At the state level we can get aggressive with mandatory mediation before a foreclosure takes place.  States can criminalize and aggressive pursue foreclosures with fraudulent documents, like Nevada has.  Regulators can work to remove foreclosure modifications from the process of servicers who are indifferent on the NPV value of the loans.  And there’s always eminent domain.

But the most important thing is to get to the bottom of what is going on with the servicing model on housing, as Attorneys General in New York, Delaware, California and Nevada are doing.  If President Obama announced that he was going to have the Department of Justice and federal regulators back these investigations, instead of backing settlements designed to kick the can on this crisis, that is something (that doesn’t require the Senate!  and allows him to pretend to be the Roosevelt of his choice!) that would make a big difference.

Until then, Occupy.  Bonus:  There was a housewarming block party, where housewarming gifts were given to the family.  Food was served, there was music, and, at night, someone with a batsignal projector played the Great Depression-era “Moving Day” cartoon on the house. In the 1936 cartoon, Mickey Mouse, Donald Duck and Goofy are being evicted by a vicious sheriff, and the sheriff is trying to seize their stuff in the house in order to sell it to collect debts.  Here it is online:

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6 Responses to Day of Action on Foreclosures: Occupy Homes Coverage, Talking with Neighbors and Relevant Studies

  1. JoyfulA says:

    When my neighbors moved without having yet sold their house (it’s big, old, and not cheap, and the market isn’t good), they had a housesitter live there for the 18 months it took to sell. She protected the house, maintained it, and kept it in showable condition.

    Why don’t banks do that with foreclosed houses they take over?

  2. Hey Mike, I just thought you should know that your the new article email message included the entire article. My limited understanding of email messages about new articles is to post a portion of the article in the email message rather than the entire article otherwise the reader may never officially visit your site yet they have read the entire article anyways.

  3. Fusion says:

    Thanks for including the Minnesota study on the impact of foreclosures on schools as well as the analysis by the Center for Responsible Lending. This is the kind of information that policy makers and the public really need to hear and understand. Great work!

  4. someofparts says:

    “Imagine a natural disaster that hit the United States and internally displaced over 5 million families. We’d understand that would require a major policy response.”

    I think that used to be true, but to me the shocking non-response to Katrina signaled that those days are over.

  5. Neildsmith says:

    Mike and his friends still don’t get it. The current “policy response” is the only practical one available. Mike has obvioulsy never had to deal with a friend or family member who is addicted to drugs or alcohol or is otherwise just a loser. We all want to think of those less fortunate as somehow victims of circumstance. Clearly, some are. But for the vast majority, their lot in life is a function of their personal pathology. This is not to excuse the behavior of the real estate agents, mortgage brokers, lenders, or securitizers… On the contrary, they are predators plain and simple. But the borrowers, bless their illterate hearts, are in way over their heads. Buying a house and managing their finances in this world has proven far to complex for them; their drug of choice is debt. Give the addict another load of cash and they do what every addict does… go on a binge. They will apologize afterward – they are always sorry afterward, but enablers are doing no favors for the addicts. Mike’s ideas to solve the foreclosure “crisis” are nothing short of enabling.

    I give you the addicts:

    http://www.nytimes.com/2009/05/17/magazine/17foreclosure-t.html?pagewanted=all

    http://www.nytimes.com/2011/11/09/business/how-a-financial-pro-lost-his-house.html?_r=1&adxnnl=1&seid=auto&smid=tw-nytimes&adxnnlx=1320840312-XtJXcVTiakxgMUVmCFAqYQ&pagewanted=all

    No sympathy. The first step is admitting you have a problem. The addict cannot be saved until he hits bottom and is broken.

  6. Pingback: Sunday Reading « zunguzungu

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