60 Minutes: Underwater Homes? Everyone’s getting wet!
That’s what the team at Oppenheim Law realized after watching 60 Minutes’ latest piece on the foreclosure crisis. This time Scott Pelley focused on a neighborhood in Cleveland where officials has resorted to tearing down what were once perfectly good homes.
Why? Because the banks that control the homes have been acting as terrible irresponsible neighbors. The end result is too many neighborhoods are littered with abandoned properties, many of which have been stripped to the bone by thieves. As many as 25 percent of these homes are now empty, according to Pelley. These neighborhoods, of which there are far too many, have fallen into a state of disrepair, where a total tear-down is the only option.
You don’t have to be underwater to get splashed
Probably the most disturbing revelation to come out of the 60 Minutes story was the foreclosure crisis has impacted all homeowners, regardless of whether they are in danger of losing their homes or not. In fact their homes didn’t even need to be underwater to feel the pinch of the housing mess.
With countless homes now empty and transformed into eyesores, those who remain are seeing their property values sink faster than the Titanic. People are left with homes that are virtually worthless and unsellable, so even if they wanted to buy a home somewhere else, it’s unlikely they could.
Once such woman featured in the story, Roberta Bryant, when asked what her home was now worth, replied “30 dollars.” She might have been laughing when she said it, but she wasn’t joking.
Banks leave communities behind, while homeowners rally behind them
While there has been plenty of debate whether people should walk away from a house that is underwater, 60 Minutes revealed a dirty little secret, banks have been doing just that.
When you look at the condition of some of the abandoned homes seen in the story, one needs look squarely at the banks for blame. They should be maintaining these homes after they foreclose on them, but instead in many cases they do nothing, allowing these homes to become blights on the neighborhood and a haven for squatters or criminal activity.
The fact is, banks are cheap too. For all the the talk about financial responsibility, Jim Rokakis, a former county treasurer who spoke to Pelley said banks sometimes won’t go through with a foreclosure to avoid spending the $8-$10,000 to tear the house down. A cost the government is often left to pay.
Which is why we’re proud of homeowners like Linda Bizzelle. She was one of many homeowners interviewed, who despite having a home that’s now worth half of what she paid for it, refuses to walk away. People like her are the reason this epidemic hasn’t spread.
Monica Hubbard, another such homeowner, was asked why she continued to pay her mortgage.
“Because I signed on the line. I made a promise”, she replied. When asked if her signature still meant something, she answered “It does.”
Now when was the last time you heard a bank say that?
The ‘Principal’ Solution
Rokasis didn’t flinch when asked what it would take to keep more homes from meeting a wrecking ball. To the surprise of no one — he puts the responsibility, as he should, on the banks.
“You’re gonna have to write down principle balances,” Rokasis told 60 Minutes, “Because if you don’t write down the principle to something that’s more realistic, it just guarantees that more people will walk away and more people will default.”
We couldn’t agree more. The banks have often taken an all-or-nothing approach to foreclosure, which is akin to putting a square peg in a round hole. It just won’t fit anymore. If the banks won’t accept responsibility for mess they created, than they at least should lessen the burden on today’s homeowner. It makes no sense why they wouldn’t want to keep people in their homes, even if they take a loss.
Isn’t getting 75,000 dollars back on a 150,000 loan better than having a homeowner walk away and getting nothing in return?
Foreclosure is a troublesome virus that is on the verge of becoming a pandemic, banks have the cure — now if they would only use it.
From the Trenches