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The backlog that keeps the average property in the state New York in foreclosure proceedings for more than four years isn’t going away anytime soon. In fact, the foreclosure logjam isn’t expected to dissipate until at least 2016, according to a new report from Moody’s Investors Service on foreclosures for loans in private-label residential mortgage-backed securitizations.
Due to New York’s judicial foreclosure process, a private-label RMBS loan in New York currently spends an average of 1,498 days in foreclosure proceedings before exiting. That’s up from 1,339 days as of 2013’s fourth quarter.
The number has continually grown since the fourth quarter of 2006, when properties were in foreclosure proceedings for an average of 271 days.
And while the number of loans in foreclosure fell from 40,693 to 38,213 in the second quarter of 2014, the figure is still above the foreclosure total at the end of 2009, when 36,844 properties were in foreclosure.
“In New York, the recent private-label RMBS foreclosure backlog of 38,213 loans could be cleared in approximately 5.7 years using the last 12 months’ average exit rate of 1,684 loans and in approximately 2.4 years using the 2008-10 average rate of 4,059 loans,” Moody’s said in its report.
New York’s foreclosure backlog is currently the second highest in the U.S., behind only Florida. Moody’s said that the backlog is due to three factors that lengthen the foreclosure process. Those factors are:
1. New York law requires mandatory settlement conferences (mediation) for all foreclosures. This process can often take more than a year. Foreclosure cannot move forward until the completion of the conferences, and courts will frequently grant long adjournments
2. Two judgments are necessary to complete the foreclosure, one on the order of reference or motion for summary judgment and one on the final judgment of foreclosure. Other states, including New Jersey, require only one judgment
3. Use of referees is necessary for several steps of the foreclosure process, which often causes long delays.
Just behind New York in ranking of states with the highest exposure to 60-plus days delinquent loans is New Jersey.
“New York and New Jersey together account for more than 20% of all loans in private-label RMBS that are more than 60 days delinquent, and the foreclosure timelines in the two states (which currently are five times as long as they were before the financial crisis) are the longest in the U.S. after Florida,” Moody’s said.
“The prognosis for New Jersey is better than for New York, however, because New Jersey’s lengthy foreclosure timelines are mainly the result of legacy issues.”
A private-label RMBS loan in New Jersey currently spends an average of 1,322 days in foreclosure proceedings before exiting, up from 1,080 days in 4Q13.
Like New York, the number has continually grown since the fourth quarter of 2006, when properties were in foreclosure proceedings for an average of 265 days.
The number of loans in foreclosure also fell in 2Q14, from 26,526 to 25,792. The current total is just below the foreclosure total at the end of 2009, when 26,901 properties were in foreclosure.
Moody’s suggests that the prognosis is better for New Jersey than New York, due to New York’s complicated legal process.
“Once the backlogs clear, we expect that New Jersey’s average foreclosure timelines will be shorter than New York’s because New Jersey’s normal foreclosure process is more streamlined,” Moody’s said.
“In addition, whereas uncontested New Jersey foreclosures are concentrated in a single office, New York foreclosures are spread throughout the court system and backlog resolution depends on the particular county and the particular judge.”
Moody’s posits that the REO liquidation timeline will reduce during the next several years because of improvements in the economy, which should help to ease the foreclosure crunch.
In New Jersey, the liquidation timeline for an REO property has dropped to 69 days from a peak of 175 days in September 2011. In New York, even though liquidation timelines extended in the second quarter of 2014, they have still narrowed to 114 days from 173 days at their peak.
But Moody’s cautions that “the improvements will not be enough to offset the lengthy foreclosure timelines and resulting high foreclosure costs that will reduce the recovery values on the loans when the properties are eventually sold.”
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In a new program meant to resuscitate vacant buildings, property owners would have to register their buildings with the city, comply with stricter code standards, and pay a $500 fine per violation.
“We don’t want any public shaming, we want to do education,” Lori Houston, director of the Center City Development Office, told members of City Council on Wednesday. “We want to educate people on opportunities that the buildings present. What incentives are available? What could this building become?”
At its core, property owners will have to register their buildings, and present a plan within 30 days of how they are to improve the building. They would have to display “vacant building” placards, carry insurance on the building, and sign a “no trespass affidavit” to allow safety responders to remove trespassers.
People who own single-family homes pay $250 to register, while owners of all other types of buildings pay $750. Failure to register would cost them up to $500 a day in fines.
The plan also raises the standard for the maintenance of vacant buildings. For example, currently all a vacant building needs to comply with city code is plywood on windows on the first floor, and not the upper floors.
“We don’t think that’s acceptable,” said Shanon Shea Miller, the city’s historic preservation officer. “What we’re proposing is for the building to look like someone could reasonably move into it. The windows are repaired. The doors are repaired. There’s no architectural features missing, or hanging off the building. So it doesn’t look abandoned.”
Failure to comply with the elevated standard could cost property owners up to $500 per violation.
The pilot program, scheduled to begin Jan. 1, would cover empty structures in the downtown and surrounding area, historic districts, as well as landmarks.
These buildings will require an annual inspection, which the owner pays for, at the cost of 1 cent per square foot, or a $50 minimum charge.
The plan also calls for an inter-local agreement between the city, Bexar County and the San Antonio Independent School District, that would grant the city first right of refusal in taking over properties that the county has acquired during the foreclosure process, and use wield those properties for future development.
“All three taxing entities have agreed to waive leans and taxes so that we can acquire them at a reduced rate and make them available for redevelopment,” Miller said.
The city estimates that roughly 800 properties will be effected in the pilot program. The plan is scheduled to go before the City Council during a June 4 B session, and to a regular council meeting on June 12.
The CCDO and OHP will then spend the rest of the year reaching out to property owners, and educating them on the other facets of the program, and other tools like State Historic Tax Credits, that are all meant to combat empty buildings.
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Richmond Heights has taken the first steps to deal with vacant, blighted residential properties in the city.
At its most recent meeting, City Council approved an agreement with the Cuyahoga County Land Reutilization Corp., commonly referred to as the Land Bank.
“The purpose of the Land Bank is to help demolish vacant abandoned homes throughout the city so that we can support our property values,” Mayor Miesha Wilson Headen said.
Headen said that it also would increase safety in the city. Richmond Heights has seen an increase in 2014 of the number of homes broken into, often to steal copper, though the thefts have gone down in recent months following the arrest of a man linked to several break-ins in the city.
Acting Building Commissioner Nino Monaco said that the Land Bank will look at each individual house that has been identified by the city and decide whether it needs to be torn down or rehabbed.
“They haven’t made a commitment to how many, but they’re definitely going to work with us,” he said.
Monaco said demolition notices have been sent out for five houses. All five are owned by banks.
Three of the houses are on Highland Road, one is on Cary Jay Boulevard and one is on Richmond Park West.
“Hopefully the banks that have been notified about these nuisance properties will take the initiative to knock it down themselves, but if not we’ll look at the Land Bank,” he said.
Headen acknowledged the work that Monaco and Economic Development Director Christel Best did to get the deal done with the Land Bank.
“When they both came on board together, they set it as a priority,” Headen said. “With Nino’s experience as a councilman in Mayfield Heights, who has extensive experience with the program, and Christel Best’s experience with her connections over at the Cuyahoga County Land Bank, they were able to expedite the process.”
The Cuyahoga County Land Bank was recently awarded an additional $1.2 million from the Ohio Housing Finance Agency as part of the federal Hardest Hit Fund. The funds bring the Land Bank’s 2014 allocation to $11.3 million, according to a news release.
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This spring, the Cuyahoga Land Bank was awarded the largest portion of $49.5 million in federal Hardest Hit Funds (HHF) by the Ohio Housing Finance Agency (OHFA) for the demolition of blighted vacant properties. OHFA recently followed up with a second round of funding, distributing more than $10 million to 15 counties with established land banks in Ohio. The Cuyahoga Land Bank received another $1.2 million, bringing the total 2014 allocation to the Cuyahoga Land Bank to $11.3 million.
According to OHFA, the HHF funds, which were made available through the Neighborhood Initiative Program (NIP), were awarded to applicants that are focusing efforts on target areas in which the demolition and greening of abandoned properties will help prevent further reduction in property values and stem further foreclosures.
“Foreclosures result in distressed sales that further depress property values and continue the downward spiral, too often resulting in vacant and blighted homes,” said OHFA Executive Director Doug Garver in a press release. “NIP is a critical component to stabilizing home values and preventing foreclosure.”
The $60 million of HHF distributed by OHFA this year are part of $570.4 million in HHF awarded to OHFA in 2010 to administer the state’s foreclosure prevention program, Save the Dream Ohio. Any funds not spent by the fall of 2016 must be returned to the US Treasury Department.
To date, the Cuyahoga Land Bank leads efforts to put this year’s funding allocation to use. Since mid-March, the Cuyahoga Land Bank has spent more than $1 million of the awarded funds to demolish more than 100 properties.
“We are working hard to take advantage of this funding by removing blighted homes from our community,” said Cuyahoga Land Bank President Gus Frangos. “Demolition of dilapidated structures that are beyond repair is an essential element of revitalizing our neighborhoods.”
Jefferson County commissioners gave the county land bank a loan on Wednesday to allow the fledgling organization pay bills until permanent funding arrives in the coming months.
A county land bank was created by state law for Cuyahoga County in 2008. The law was amended in 2010 for 43 other counties.
The land bank will demolish dilapidated structures throughout the county and allow property titles to be cleared of liens. Under the land bank, property and houses can be more easily transferred to a responsible property owner. Banks that have foreclosed on properties can donate the properties to the land bank.
The county will take 5 percent of the delinquent tax proceeds to fund the land bank. School districts supported the measure, even though it means the districts will receive less in proceeds from delinquent tax sales of properties.
The land bank will get about $30,000 in delinquent tax foreclosure money through the end of the year. said Domenick Mucci, Jefferson County Regional Planning Commission director. Mucci said the land bank will get about $125,000 to $160,000 a year through the delinquent tax fund.
The county also is eligible for $500,000 in a state grant. The grant application is due by Aug. 29.
County Commissioner David Maple, who sits on the land bank board, said several areas of the county, including Steubenville, Toronto, Wintersville, Mingo Junction and Knox Township, have been identified to get funding for demolitions once the state grant is received.
County Commissioner Thomas Graham said the targeted areas can be altered once the grant is received.
Mucci said the land bank will reimburse the commissioners for the $5,000 in start-up money once permanent funding is received.
Commissioners also agreed to pay the regional planning commission $1,500 a month for administering the land bank.
Maple, Graham, county Treasurer Raymond Agresta, Evan Scurti, county port authority economic development director, and Chris Petrossi, Steubenville Urban Projects director, are the members of the land bank board.
Also, the commissioners approved setting aside funds as part of the U.S. Department of Agriculture’s funding of the Crestview-Belvedere sewage project.
The U.S. Department of Agriculture provided the county $5,884,000 in loans, with a 2.75 percent interest rate, and $4,979,000 in grants, for the $11 million sewer project.
The federal agency required the county to annually set aside $82,461 in money that can be used to pay for the purchase of equipment for the water and sewer department. The county also has to set aside 10 percent of the annual debt of the project or $25,164 until the amount of money equals one year of debt payment.
The set aside of money will continue until the 30-year bond is paid off.
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In February 2010, President Obama unveiled the Hardest Hit Fund, a United States Treasury program to use Troubled Asset Relief Program (TARP) repayments to provide targeted aid to families in states hit hard by the economic and housing market downturn. In total, the Treasury provided $7.6 billion in assistance to 18 states and the District of Columbia, selected on the basis of either high unemployment or steep home price declines. The program was designed to help people at risk of foreclosure with measures such as mortgage payment assistance, principal reduction, or support transitioning into more affordable homes.
By the end of 2011, however, public officials in a number of the states that had received HHF money – most notably Michigan and Ohio – were concerned that they were facing perhaps an even more urgent problem.
Thousands of houses were being abandoned in those states’ cities, pushing down the value of neighboring properties, destabilizing neighborhoods, and indirectly exacerbating the very problem that HHF was trying to deal with: houses going into foreclosure and families losing their homes. Jim Rokakis, Executive Director of the Thriving Communities Institute in Cleveland and former Cuyahoga County Treasurer; and Dan Kildee, then Executive Director of the Center for Community Progress and now Member of Congress for Michigan’s 5th District (and former Genesee County Treasurer), along with others, began to explore ways to raise more funding for demolitions in hard-hit cities like Cleveland, Flint or Detroit.
“We had to make the case for internalizing the externalities of blight and vacancy,” said Kildee. “We had to prove to Treasury that abolishing vacant structures that will not be repurposed will reduce foreclosure from abandonment and that this is, in fact, primary prevention of foreclosures.”
These advocates found a responsive ear at the Treasury Department, where key officials like Don Graves and David Dworkin had deep roots in those same cities. During 2012, in parallel with efforts to promote federal legislation – which proved unsuccessful – Treasury staff began to explore whether it might be possible to authorize demolition of derelict properties under the legal constraints of the TARP legislation.
Their efforts were supported by a growing body of research showing not only that abandoned properties have a significant, measurable effect on property values, but that demolition of those properties, under appropriate circumstances, can help reverse the damage. This research was critical in enabling the Treasury Department to demonstrate that demolition could have an impact on foreclosures.
By spring 2013, the Treasury Department was ready to make the change. Treasury staff had been in ongoing contact with officials in Michigan and Ohio, and the Michigan State Housing Development Authority started the ball rolling in April by making a formal request to the Treasury to use $100 million of the state’s HHF money for demolition. Treasury moved quickly, and the request was approved in late May. Ohio followed suit soon thereafter, receiving approval to spend $60 million of its HHF money for demolition. Since then, Treasury has approved similar requests from Indiana ($75 million) and Illinois ($30 million).
The Michigan State Housing Development Authority decided to allocate all of its demolition funds to five particularly hard-hit cities – Detroit, Flint, Pontiac, Grand Rapids and Saginaw. Each city was then required to submit a plan showing how their demolition strategy would strengthen their communities and reduce the risk of foreclosures, and the program was officially launched in September 2013.
Ohio officials decided to implement the program using the state’s network of county land bank authorities. They invited proposals from land banks through a competitive process that required each applicant to submit a plan, showing how demolition would be targeted as “part of a larger, comprehensive strategy to stabilize home values and prevent foreclosure.” Proposals for an initial funding round of $50 million were invited in January 2014, allocations announced by the end of February, and funding agreements executed at the end of March. A second round of $10 million will take place this summer. Indiana exannounced its first funding awards in late May 2014, while Illinois’ program is just getting under way.
The rapid development and ramp-up of this program reflects not only the general sense of urgency that people in Michigan, Ohio and elsewhere feel about the impact of derelict properties, but also the requirements of the HHF program, under which all money given to the states must be spent by the end of 2017. That is three and a half years away, but closer than it may seem. One of the conditions set by Treasury to make the blight elimination program conform to the TARP legislation is that the entity doing the demolition must own the property before they knock it down. While this is not a problem for land banks like the Genesee County Land Bank Authority which already has a large inventory of vacant properties, land banks that need to start acquiring properties from scratch will need all the time they can get.
The program is just getting off the ground – the first properties in Michigan are being demolished, while Ohio’s land banks are not far behind. To date, implementation of the program has brought successes but also challenges. Some land banks have found the program structure, under which they do not receive up-front funds, but instead are reimbursed by the state as demolitions take place, to be a challenge, as it required them to secure additional financing. In Flint, Genesee County agreed to provide short-term debt financing for the program, while in Detroit, the land bank was able to negotiate a $6 million revolving line of credit.
There are still some question marks to be sorted out. The requirement that a lien be placed on each property for the demolition cost is still being fine-tuned, including the question of whether the liens can be released when an end user is found for the property within the three-year lien period; the level of historic preservation review for properties in historic districts also needs clarification.
Overall, though, the program seems on track to become a major boon for distressed communities. A particularly valuable feature of the program is that allowable costs include site greening – so that the vacant lot is a community asset rather than a potential nuisance itself – and site maintenance for three years; as Jim Rokakis says, this “has gotten a conversation started about beautification and green reuse options.”
In Detroit, the scale of the program has spurred a level of interagency cooperation that did not previously exist, leading in turn to greater efficiency in the demolition process, as well as stronger demolition and environmental standards. In Ohio, the Lucas County Land Bank is partnering with the city of Toledo to do the demolitions in-house, which they estimate will reduce costs by around 20%. The Land Bank also plans to use part of the administrative money that comes with the program to conduct a parcel condition survey to help better target future blight elimination efforts.
Demolition alone is not the solution to urban blight or foreclosure, but it can make a major contribution to combating blight. The way in which the Treasury Department adapted the Hardest Hit program to this need, the ways Michigan, Ohio, Indiana and Illinois have taken advantage of the opportunity to create thoughtful state-level programs to fund demolition, and the ways in which land banks and other entities in those states have designed and implemented their programs shows that public agencies can respond creatively – and speedily – to address a need.
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A decade after subprime mortgages tore through neighborhoods in Greater Cleveland and nationwide, another powerhouse bank is paying billions to settle with the government.
Citigroup will pay $7 billion to settle the Justice Department’s investigation into the bank’s history of approving subprime mortgages.
The agreement was announced this morning, weeks after Justice Department vowed to sue the nation’s third-largest bank if a settlement wasn’t reached. Citi was one of the largest originators of subprime loans in Northeast Ohio.
Citigroup will provide $2.5 billion for consumer relief, including reducing principal amounts for some homeowners, and financing for construction and preservation of affordable housing, by the end of 2018. Details about how homeowners can tap into that $2.5 billion should be announced soon.
Citi will also make a $4 billion civil monetary payment to the Justice Department and $500 million in compensatory payments to states and the Federal Deposit Insurance Corporation.
Subprime mortgages were the single biggest cause of the financial crisis of 2008 because the practice of rubberstamping loan applications falsely pushed up home prices until the bubble burst, and banks and everyday investors started losing money as loans went bad.
While mortgages with slightly higher rates are appropriate for borrowers with lower credit ratings or lower down payments, many banks cashed in on the subprime phenomenon by approving ridiculous loans. Thousands of loans were originated nationwide to people with little or no income in some cases. In others, loans were approved for amounts that were double or triple the actual value of the home.
Banks were able to survive participating in the practice because they made money from fees to originate the loans but generally sold the loans to investors before the loans went bad.
The financial crisis ultimately claimed the jobs of 9 million people nationwide, while 4.3 million homes were foreclosed on from 2008 to 2012. People saving for retirement lost half of their wealth in 18 months.
Locally, two of Cleveland’s four largest banks, National City and Ohio Savings/AmTrust, collapsed because of subprime loans. Nationwide, nearly 500 banks failed over a five-year period, after only 25 had failed in the previous seven years.
JPMorgan Chase reached a $13 billion settlement late last year over its role in subprime mortgages. Bank of America is reportedly in the process of negotiating a settlement as well.
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Watching the two homes next door to their house on the west side’s Camden Avenue slowly deteriorate, Jim and Bonnie Walker could only wait out their regression. One home was purchased, slowly rebuilt, but the other fell into foreclosure according to Jim. Its interior filled with black mold forcing the city of Cleveland to declare it unfit for living, tabling it for demolition.
That day finally came.
“My wife called me one day and said they were tearing it down,” said Jim. “I couldn’t wait to jump on it and see if we could pick it up.”
“We wanted both houses because they both were in terrible shape,” said Bonnie Walker. “But, thanks to the Land Bank people, we couldn’t be happier that we got this and now it’s everything we wanted for a yard.”
The Side Lot Program is something Lilah Zautner, Manager of Special Projects and Land Reuse for the Cuyahoga County Land Reutilization Corporation, does many things for home owners tired of neighboring, abandoned houses, helping to raise property values, and increasing the local county tax base for Cuyahoga county.
“It’s taking the home out and putting roots in,” said Zautner. “Home owners can purchase properties next to their home. They make play spaces, they add on additions to their home, they put in garages, they create beautiful yards. It adds value to their home. It also beautifies the neighborhood and then it puts vacant properties back on the tax rolls, which is a win-win situation.”
Bonnie is simply happy to have a yard, now completely fenced in to the tune of around $4,000 and Jim’s hard labor, but it’s much more safe now for quick-moving grandchildren.
“They just love it. And it’s safe since it’s all fenced in, it’s safe for them and I don’t have to worry about them. They can’t get out as easily. The grandkids are 10, 9, 8 and 4 so it’s great and now my daughters come over a lot more and they can put the kids out and we can relax and have a good time and talk while bonding without worrying about the kids yelling mommy,” laughed Bonnie.
Zautner said the program has been a huge success for many more families than just the Walkers.
“It really helps residents as their families expand while beautifying the neighborhood, restoring the urban edge, as these properties that can longer be saved are coming down making way for new development like the Walker’s property. We have many folks just like that. We have done 167 side yards so far, many of them are just like those folks. They have put in many hours of energy, love and money into their yards. It’s so great to see where a house just sat there degrading and now it’s just gorgeous with fresh grass, nice fencing, and beautiful landscaping. It’s awesome to see what people can create if you just give them more space,” said Zautner. “It increases the value of their home and the homes around them.”
“I actually had my taxes lowered because of the decreased value from both of the houses next to me before. They were in that bad of shape,” said Jim Walker.
The process took about six months for the Walkers to obtain the rights to the property. The final bill? “$100,” said Walker. “That’s it. The rest was all my money and my both of our labor.”
“If you’re interested in the Side Lot Program, or any of the programs that the Cuyahoga Land Bank offers you can go to www.cuyahogalandbank.org and the phone is 216-698-8853,” said Zautner.
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Mayfield Heights City Council has declared four properties nuisances and will move forward with demolitions this summer.
Council unanimously voted each property a nuisance and showed support for the demolitions at a special meeting of council July 2.
Properties that may be demolished include:
– 1104 Summit Drive —single-family dwelling and attached garage
– 1150 Commonwealth Ave. — single-family dwelling
– 1397 Worton Blvd. — detached garage
– 1563 Crestwood Road — single-family dwelling and detached garage
All properties are vacant, and the city will send a notice to property owners stating the property has been declared a nuisance by city council.
Within 30 days, the property owner can stop a demolition if the nuisance is abated, said Mayfield Heights Law Director Paul Murphy. If there is no response, the city can move forward with the demolition.
The city recently signed a contract with the Cuyahoga County Land Bank that will allow Mayfield Heights to submit a request to the land bank to demolish the properties, Mayor Anthony DiCicco said.
The land bank has 30 days to decide if they will accept the property and demolish it or reject the property and the city continues on with the demolition.
The Cuyahoga County Land Bank will make a decision on each property, not as a group.
If the city is responsible for all the demolitions, it will cost no more than $55,000, according to past resolutions.
DiCicco said the property owner will be responsible for the cost of the demolition, either to the land bank or the city. The property owner can pay for the demolition while it is happening or will be placed on the property tax.
The city demolishes one or two properties a year, he said, but more homes are becoming vacant because of the recent “housing crisis.”
“This is good for the city because these nuisance properties are eyesores and are a safety concern,” DiCicco said. “This will allow us to fight blight in the neighborhoods and typically when a house is demolished a new one is built, so this will work toward improving the housing stock.”
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In a meeting with about 60 senior citizens at the Cleveland branch library in Glenville the night of May 28, Councilman Kevin Conwell asked for a show of hands from residents who felt trapped in houses that have plummeted in value.
Every person in the room raised their hand.
Conwell, joined by Councilmen Mike Polensek and T.J. Dow, had invited seniors to discuss what he calls “shelter poverty,” people stuck in houses they can’t afford to leave, in neighborhoods overwhelmed by blight.
“Too many of our residents are surrounded by boarded-up homes, crime, poverty and hopelessness,” said Conwell. “Taxes and the price of government are high. Services are low. And their houses are now worth so little they can’t afford to fix them up.”
In many Cleveland neighborhoods, it’s every bit that bad.
A study of property records in Cleveland and five contiguous communities shows the median sale price of existing homes dropped an astonishing 62 percent (from about $86,000 to about $33,000) between 2006 and 2013. Those prices do not include nontraditional low-value transfers such as sheriff sales, quit claims and forfeitures.
In Cleveland, sale prices dropped 63.4 percent. They dropped 80.9 percent in East Cleveland, 67.5 percent in Maple Heights, 67.3 percent in Garfield Heights, 62.3 percent in Euclid and 58.9 percent in Newburgh Heights.
Median sales prices for homes in Cuyahoga County’s other 53 municipalities dropped 21 percent ($154,000 to $121,000) during the same seven-year period.
The study, which used home-transfer data and assessed property valuations, was conducted by the nonprofit Thriving Communities Institute, with backing from Cleveland City Council, Neighborhood Progress Inc. and the Cuyahoga County Land Bank. It was completed in March.
Entitled “The Cost of Vacancy – Everybody Pays,” the report also explained why the dramatic drop in sale prices should bother every resident of Cuyahoga County, not just those in Cleveland and the five contiguous communities.
Declining property values in Cleveland and its inner ring have shifted nearly $45 million in property tax burdens to the more prosperous suburbs – meaning that taxpayers in outer-ring suburbs pay more to fund levies for things like county social programs, the Cleveland-Cuyahoga County Port Authority, Cuyahoga Community College and the Cleveland Metroparks.
Countywide tax levies are based on assessed property values and paid by the property owners. In 2006, property owners in the outer-ring suburbs were responsible for paying 79.2 percent of the county’s property tax bill. By 2012 that figure had grown to 83.5 percent.
Lots of good things are happening in a few parts of Cleveland, but the threat that the inexorable spread of blight poses to this community cannot be overstated. That spread – and the crime and human misery that follow it – will not stop until those vacant buildings come down.
It is no coincidence that the primary recommendation of the task force convened by the Obama administration to attack the blight in bankrupt Detroit was to raise the $850 million needed to quickly demolish 40,000 empty buildings.
“Blight is a cancer,” said task force chairman and Cavaliers owner Dan Gilbert when the group issued its report in late May. It “sucks the soul out of anyone who gets near it.”
With a nearby view of what happened a few miles to the north, the Toledo Blade has launched an ongoing series of front-page stories entitled, “The Ugly Truth about Toledo.” The series focuses on the spread of blight and the urgent need to demolish at least 5,000 structures.
Closer to home, the latest figures kept by the Western Reserve Land Conservancy show that, as of June 19, there were a minimum of 9,430 vacant structures in Cleveland and 19,644 countywide.
At the present rate, the Northeast Ohio Sustainable Communities Consortium estimates that by 2040 an additional 175,000 homes will be abandoned in the 12-county region. The cost to take them down: nearly $2 billion.
“It’s a no-win situation: Ignore the problem and watch the blight and disinvestment spread even farther, or spend money you don’t have, raise taxes, and drive more residents and business away, in order to try to keep things from getting worse,” wrote Jason Segedy, director of the Akron Metropolitan Area Transportation Study, in a report that can be found at http://thestile1972.tumblr.com/post/71691657173/today-is-yesterdays-tomorrow
The most blighted communities are tearing down as many structures as possible. And County Executive Ed FitzGerald wisely wants to spend $50 million on clearing blighted neighborhoods. But because demolition is costly (about $10,000 for a single-family home), it’s not nearly enough.
Cleveland City Council President Kevin Kelley knows that.
“This is a horrible problem,” said Kelley. “And it’s an expensive one. But these structures absolutely have to come down. “
For several years, the loudest voice on this issue has belonged to Jim Rokakis, director of the Thriving Communities Institute and a former Cleveland councilman and county treasurer.
“We can fix this problem,” he insisted. “If we as a community come together with the determination to take down these structures, clean up the soil and make land green – if we do that in a holistic way – we can actually turn a negative into a positive.
“It takes will. And it’s not as exciting as a chandelier in Playhouse Square or a new restaurant in Ohio City. I get all that. But if we don’t do anything about it, things will only get worse.”
That may seem to some like a prediction. It’s actually a fact.
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Even in this thriving suburb, some abandoned homes are being torn down.
Three such homes have been razed so far this year, and City Council plans to vote Tuesday night, June 24, on a fourth. Officials say they may have seven or eight demolished, all told.
The Cuyahoga County Land Reutilization Corp. is tearing down buildings for Middleburg, Berea and many other cities. In the past four years, the land bank has helped Berea, one of its first partners, deal with 13 structures so far, including vacant car dealerships in the North End. Middleburg signed up with the land bank last August.
Cheryl Stephens, the land bank’s director of acquisition, disposition and development, says, “If you’d told me I’d have three demolitions in Middleburg Heights this spring, I would have been surprised.” But it seems that there are problem homes almost everywhere.
Middleburg officials say they try hard to work with homeowners to fix homes rather than raze them. But some of the homes’ owners have died and left no heirs. And all the homes have decayed too much to be worth saving. They’ve been doomed by leaky roofs, rotten interiors, bugs, mold, rats and more. One foreclosed family reportedly left the water running in spite.
“These houses sit, and they’re not safe,” says Middleburg Service Director Jim Herron. He worries that “flippers” might scoop them up and fail to fix them up properly.
Ward 4 Councilman John Grech says, “This is going on throughout Cuyahoga County and throughout the country. People are just abandoning their properties. It’s a shame.”
Grech says a bulldozer is a last resort, but the city has to keep the neighborhood safe and desirable. Officials tried for a couple of years to save a home on toney Webster Road with piles of possessions several feet high. “There were all kinds of animals and mold,” says Grech. “It was just disgusting.”
Now council will vote Tuesday on whether to ask the land bank to demolish a house at 7125 Fry Road, north of Bagley Road. The front window gives a good view of a crumbling ceiling.
The demolition is good news to a next-door neighbor, Heidi Kisela, who drives a bus for the Berea school district. “If they can’t fix it, definitely tear it down.” She says local youths have broken into the vacant house and smoked what smells like marijuana there.
The land bank demolishes buildings at no cost to local governments. It spends about $18 million per year of money from the county and higher governments. It recovers what it can from property owners.
The price of demolition varies. It cost about $16,000 to empty and raze the home on Webster. Stephens says the land bank has to empty a home first, because household debris goes to different landfills than construction debris.
Officials in some old, dense suburbs don’t want to replace razed homes. Instead, they’re helping neighbors create community gardens or buy the empty lots to expand their yards. The goal is to reduce density and boost property values.
For now, the razed lots in relatively young, prosperous Middleburg still belong to private owners. The city plans to mow the grass as necessary and bill the owners. Herron said he’d like eventually to see new homes there but would be open to other possibilities.
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The Lake County Land Bank demolished its first blighted home on Sept. 30, 2013, kicking off a project to strengthen both the properties and the neighborhoods these homes were located in.
Since that first home in Mentor-on-the-Lake was removed, 38 more vacant, foreclosed and blighted residential structures have been removed by the Land Bank.
“It makes the homes and land more attractive and helps neighborhood stabilization,” said state Rep. John Rogers, D-Mentor-on-the-Lake, who also is executive director of the Lake County Land Bank.
In addition to the 39 properties removed by the Land Bank, another 10 were addressed by the home owners or another interested party. Of those 10, Rogers said three or four had owners and they came in and made the repairs necessary to get the homes back up to code, while the the rest were demolished.
Funding for the home demolitions comes from the Moving Ohio Forward program. The program, started by Ohio Attorney General Mike DeWine, was designed to help communities across the state demolish dilapidated and abandoned residential properties. A total of $75 million has been allocated for the project, with the money coming from Ohio’s share of the national mortgage settlement reached with the country’s five largest mortgage servicers over foreclosure abuses, fraud and unacceptable mortgage practices.
As of May 28, about 10,467 structures have been demolished statewide through the Moving Ohio Forward program according to the Attorney General’s Office.
The Lake County Land Bank has received about $800,000 in funding so far and about $732,500 has been spent. Rogers said the demolitions have averaged out to about $18,000 per home, more than they originally expected, but still “well within the scope of what we intended to do.” Five percent of the funds also go to reimburse administrative costs. CT Consultants of Mentor is overseeing the administrative component of the program.
The first $500,000 is covered by the Moving Ohio Forward grant, from there the cost is split with the Land Bank. Rogers said all costs incurred by the Land Bank for properties held by private owners will be subject to a lien in an effort to recover any funds expended. These funds will be used for future projects.
The city of Painesville has seen the most homes demolished so far with 10. Mentor-on-the-Lake and Eastlake have the second most with five each. Madison Township has the third most with four.
Another 36 residential structures have been tentatively identified for future demolition.
Of the structures, Eastlake has the most with 11, followed by Mentor with five and Willowick and Madison Township with four each.
Properties scheduled to be demolished are first identified and condemned by the communities. The property owners and all interested parties are notified that the property has been condemned and that the intention is to demolish it.
Rogers said the parties usually have between 30 and 45 days to respond. After that timeframe, the government entity passes a resolution to seek assistance from the Land Bank.
Before the properties can be demolished, environmental checks need to be done to find and remove things like asbestos.
After a structure is removed, the land is graded and seeded in a process that takes seven to 10 days.
In Geauga County, Bainbridge Zoning Inspector Karen Endres said that approximately 30 homes have been demolished through the Moving Ohio Forward program so far. Endres said there are about another three or four in the county that have been identified for possible demolition.
Unlike Lake County, Geauga does not have a land bank. Bainbridge Township took over the administrator role in the summer of 2012, helping other townships demolish homes in their communities for a flat 5 percent fee.
Cuyahoga County, like Lake and Geauga counties, has received grant funding from Move Ohio Forward and other sources, but District 11 County Councilwoman Sunny Simon said that it is enough to address the county’s large number of blighted homes.
The problem, she said, is especially raging in inner-city Cleveland and in some of the inner-ring suburbs. Along with the blighted homes come crime, vandalism and other problems.
“It just really impacts the entire county,” she said.
Nate Kelly, Cuyahoga County’s deputy chief of staff of development, said estimates of the exact number of vacant and distressed properties in the county can vary based on who is asked. He put the number at about 12,000.
In his State of the County Address in February, County Executive Ed FitzGerald introduced a plan to borrow up to $50 million for demolition projects. Now Cuyahoga County Council is working on the details of how that plan will work.
“It’s still in its infant stages,” Simon said. “Council is studying this plan in depth from both a financial planning and practical standpoint to maximize the impact of such a plan.”
Unlike through the Move Ohio Forward Program, Kelly said that funds through this proposed plan can be used for both residential and commercial demolitions. Another difference is nuisance properties will also be eligible for demolition.
Simon is reaching out to the mayor’s and council members in her district to see what the needs are in those communities.
Kelly said it will be up to the individual communities to identify which properties are in need of demolition. How the municipalities execute the demolitions will also be up to them. Kelly said some have the capacity to remove the structures themselves, while others will “undoubtedly” use the Cuyahoga County Land Bank, which has experience with efficient demolitions.
There is no timetable for when the plan will be in place, but Simon is hoping to have it finalized by the end of the year.
“We’ve been pretty consistent in pursuing this,” she said.
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Cuyahoga County officials plan to put Larchmere’s long-vacant Sedlak building up for Sheriff’s Sale, possibly this summer.
If no one wants to start the bidding at $225,000 to pay off back taxes, this could finally clear the way for the county Land Bank to briefly take ownership of the property before turning it over to investor Michael Montlack for redevelopment.
The county Board of Revision moved the property into foreclosure June 13 after making a formal determination that any current and purported interest in buying the site had evaporated.
A lien holder on the property, located at Larchmere and 127th Street, last year had a “For Sale” sign placed on the building and claimed to have a buyer lined up with an asking price of $399,000, buying some time in the foreclosure process for another six months.
The Board of Revision granted a continuance, followed by three more from the county Prosecutor’s Office.
“It’s been a long slog with this property, but it looks like it is finally coming into what is hopefully a practical use,” said Ohio Fair Lending Coalition Director Chip Bromley.
Montlack has already been “vetted” by stakeholders in the process that included the Shaker Square Area Development Corp., Bromley noted.
As a local developer, Montlack appeared at an earlier meeting of the Shaker Square Alliance with the idea of rehabilitating the property.
Bromley also pointed out that once the property is turned over to the county Land Bank, the back taxes are “removed from the equation,” leaving money to fix a building that was in dire need of repairs over a year ago.
While the building continued to sit and deteriorate, Greg Staursky, SHAD’s Co-Director of Properties and Project Construction, noted that it at least allowed time to get the property released from bankruptcy proceedings in California.
Staursky said after the June 13 Board of Revision hearing it was unclear from the county Prosecutor’s Office whether there would be one or two Sheriff’s Sale offerings.
“But there is the thought that the property, in its condition, is not worth the amount of past due taxes so a buyer is unlikely.
“Although the original hope was that the Board of Revision would also directly transfer Sedlak to the Land Bank, this is an additional step towards that goal,” Staursky added.
At the June 12 meeting of the Shaker Square Alliance, SHAD Board President George Palda said “it’s a significant location on Larchmere that needs to be improved. It’s not enough to keep kicking the can down the road.”
Staursky also noted that the City of Cleveland has an active condemnation on at least some of the multiple buildings that make up the property.
Bromley earlier expressed some frustration that “there’s been seven more months of dancing around on this.”
But he pointed out after the ruling that the big difference with Sedlak is that it’s commercial property, as opposed to single-family homes and residential property, which is the overwhelming majority of what the Land Bank handles.
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