Cuyahoga County Treasurer Jim Rokakis on his proposed “better bank”: “If we don’t save that homeowner, there’s a pretty good chance that house is going to go dark and it will become one more blighted property that ultimately becomes the responsibility of this land bank.” Cuyahoga County’s new land bank is likely to acquire its first properties this week, starting a new phase in the local battle to combat an unprecedented foreclosure crisis.
Up to six parcels in Cleveland and Brooklyn will be test cases for the nonprofit corporation, which expects to take title to roughly 250 parcels by the end of the year.
The land bank also is considering a new way to avert foreclosures in the first place, creating a “better bank.”
The bank would buy mortgages from lenders at deeply discounted prices to keep people in their homes with a reduced mortgage payment, said County Treasurer Jim Rokakis, who also serves as the land bank’s chairman.
The new mortgage would then be sold to a lender or mortgage-servicing company, with the money coming back to the land bank to help other homeowners. Rokakis believes as many as 600 homes a year could be saved this way.
But does buying and selling mortgages fit the land bank’s original mission and state law?
Rokakis said lawyers have reviewed the law and said the answer is yes. State Sen. Tom Patton, the Strongsville Republican who sponsored the legislation that allowed the land bank to be created, agrees. “This is part of the mission to keep people in their homes and reduce blight,” Patton said.
But Republican State Sen. Tim Grendell — who also took a lead role in the legislation — believes the mortgage idea goes beyond what was contemplated. He likes the concept but said: “It should be the legislature that approves the expanded power of the land bank.”
Rokakis said he has talked with foreclosure-prevention counselors who have seen lenders willing to unload an $80,000 mortgage for as little as $10,000, walking away from a house whose value has shrunk. Under his plan, the land bank could buy that mortgage for that $10,000, keep the owners in their home, stave off the blight that follows when houses are abandoned and institute safeguards that protect the new mortgage holder. He said he’s met with enough people — including some representing lenders and mortgage companies — to believe the concept would work.
Since the beginning of the year, about 8,800 new foreclosures have been filed in Cuyahoga County, according to Case Western Reserve University’s Center on Urban Poverty and Community Development.
“We have a crisis unlike any we’ve seen,” Rokakis said. “And if we don’t save that homeowner, there’s a pretty good chance that house is going to go dark and it will become one more blighted property that ultimately becomes the responsibility of this land bank.”
Rokakis hopes a proposal for the “better bank” will be ready for the seven board members to consider at their next monthly meeting.
At Friday’s board meeting, members approved a new six-month business plan detailing initial program activities and outlining a longer-term strategic vision that should guide the organization as it secures the projected $40 million via bonds or loans that it plans to spend over three to four years. The land bank expects to receive the first installment of that money in November.
Formally known as the Cuyahoga County Land Reutilization Corp., the land bank opened for business in June. It’s the first of its kind in Ohio, a quasi-governmental nonprofit that is like a real estate corporation with a public mission. It plans to strategically acquire foreclosed and abandoned properties and see them rehabilitated when possible or demolished where necessary — with the aim to reduce blight, increase property values and improve quality of life.
The county has thousands of vacant or abandoned properties. And the business plan notes that just the cost to demolish every property in the city of Cleveland that needs to be razed could exceed $125 million.
The aim is to focus the land bank’s dollars where they will have the biggest impact. Chief Operating Officer William Whitney said the land bank will probably do selective and strategic interventions in two primary ways. The first is to acquire property in still strong and stable neighborhoods where eliminating just a few problem homes could protect property values. The second is to work in more-troubled neighborhoods, leveraging land bank resources in partnership with local governments, other nonprofits or community development groups.
Whitney said it is difficult to project the timing and volume of acquisitions because of a series of complicating factors. At the top is negotiating deals for bulk sales or transfers with the owners of foreclosed properties, including national financial institutions. “Unfortunately that’s a difficult and time-consuming process,” Whitney said. So far no such agreement is in place.
Memorandums of understanding also will be crafted with any of the county’s 59 municipalities that want to work with the land bank. But deals can be done before all the details of those agreements are in place.
The new business plan is based on $1.5 million now in hand — with the understanding that the pace and volume of acquisitions could speed up once more money flows in.
The roughly 250 properties the land bank currently expects to acquire this year are far fewer than the 1,000 Rokakis had initially projected. He said Friday that in his enthusiasm he had been overly optimistic, while the staff was being cautious with its number of 250. The land bank does not yet have the millions it anticipates coming in and is still fine-tuning methods to acquire, maintain, demolish and transfer properties.
Those systems will be tested with the first acquisitions this week.
There’s big expectations on the land bank, said Cheryl Stephens, director of acquisitions, dispositions and development.
“When we go into mass production, we need to have made the prototype correctly,” she said.