In this week's print edition, out this morning (hint, hint), Bianca Phillips, Hannah Sayle, and I take on the collateral damage of the foreclosure crisis — Memphis neighborhoods — and what's being done to combat blight and deterioration.
Of course, not all of Memphis' blighted properties are foreclosures. Many are investment properties long ignored by their owners and in need of some serious upkeep.
What I find the most alarming is the scale of Memphis' blight. In discussing this story with friends and colleagues, most people I talked to said something like, I have a house like that on my block. Or around the corner. Or in my neighborhood.
The story focuses on several people's attempts to fight blight: Attorney Steve Barlow's efforts to sue owners of dilapidated property under the Tennessee Neighborhood Preservation Act; Brad Watkins' "Blightwatch" videos on YouTube and his confrontation of Wells Fargo's over back taxes they owe to the city and the county; and Tommy Wilson and his bomb the blight art project.
One of the things people have been very interested in — especially given how many of them have said they have blighted property near them — are the lawsuits.
I should note that you can't just sue your next door neighbor for having a junky house. But if the property is vacant or renter-occupied and doesn't meet code, then you could sue for the loss in value to your property or to force the property owners to fix whatever problem exists.
I'm one of those people fascinated by the mortgage/foreclosure crisis: how it happened, how it was allowed to happen, the resulting effect on Americans and their communities ...
So I've recommended Michael Lewis' The Big Short to a lot of people. Lewis is one of these talented writers who can take a sprawling, complicated issue and make it easily digestable. In this case, he focuses on the six or so people who saw the bottom coming and bet against the American mortgage machine. By doing so, he encapsulates exactly what was going on and how things were slipping through the cracks.
Fresh Air's Terry Gross also focused on the "complex foreclosure mess" last night with New York Times financial reporter Gretchen Morgenson.
One of the things that both Morgenson and Lewis talk about is how a bunch of risky loans would be pooled together — and because that seemed to equal a diverse portfolio — it would be given a better rating.
From Fresh Air:
"Thousands of them would go into one security, like say 10,000 mortgages, from a variety of places. They were trying to achieve diversification in these pools so as to diminish the risks associated with them.
And so you would have varying economic ability to repay in the loans. You would have very high-grade loans, you would have subprime loans, you would have a variety of loans from different geographic areas. And so this would, you know, it was hoped, be put into a security that would perform well over time and, you know, where people would repay the mortgages. And at the end of the line, the owner of the securities, and there were many of them because they were sliced up into varying risk degrees, okay. But in case, the idea was that everyone pretty much would get repaid at the end of the line.
Well, what was happening that many people did not recognize was that the types of loans were poisonous, toxic as you describe them, made to people who could not repay them, carried interest rates that would ratchet up dramatically after a few years, thereby making certain that they couldn't be repaid."
Lewis goes even further, talking about how loans were made to people who had very little credit history (thin credit files). Say, recent immigrants to the country. Because they had no previous credit history, it was easy to manipulate a high credit score. These loans would then be used to help achieve a certain average credit score in the pool of mortgages, making them appear to be less risky.
So if you're interested, both Lewis' book and Gross' interview are worth a look.
By the time December rolls around, all the residents currently living at Cleaborn Homes will have moved out to prepare for demolition of the public housing development. But that leaves a number of students enrolled at Georgia Avenue Elementary, Vance Middle, and Booker T. Washington High schools most likely changing schools.
Today, the Memphis City Council asked MHA & HCD head Robert Lipscomb about the decision to move families —and the students — during the school year.
"The chair has received numerous calls concerned about the residents and the children being moved from their homes and their schools in the middle of the school year," said council chair Harold Collins. "Initially the chair saw it as a Memphis City Schools issue, but because our division is leading the charge, I thought we needed to publicly hear it."
Lipscomb told council members that the city has typically heard about Hope VI grants in February. This time, however, they did not receive word until June.
"Short-term, there's a bit of disruption. Long-term, we're moving them to a better situation," Lipscomb says. "I don't want to move kids in the middle of the school year, but it's the hand we've been dealt."
Case workers have been assigned to each of the families, but it's slowed down the process for residents eager to move.
"It's about 400 families and they've been ready to move for a long time," Lipscomb says. "They've expressed frustration to us: Why are you holding us up?"
Collins asked how to planned to re-populate the three schools, one of which — Booker T. — is Lipscomb's alma mater.
City Council member — and former school board commissioner — Wanda Halbert noted the city's lack of oversight or accountability from the school district.
"The city is responsible to improve the city," she said. "We can't focus projects and infrastructure around keeping the schools full."
Over the years, outside observers have talked about the school system's need to close schools with dismal enrollment numbers, but it's not a popular topic among school board members or administrators.
Lipscomb said he hoped redevelopment efforts would eventually revitalize area schools.
"Over time, people will come back, but we've got to clean that area up. As we rebuild [Hope VI project Triangle Noir], people will come back," Lipscomb said. "Sprawl is killing us. That's the problem."
Memphis — and its lawsuit against Wells Fargo — were featured on American Public Media's Marketplace last night.
Jeremy Hobson and local attorney Steve Barlow drove through Orange Mound, and they estimated that a third of the neighborhood's homes have gone into foreclosure.
In the lawsuit, the city alleges that Wells Fargo violated the Fair Housing Act by engaging in what some call "reverse red-lining," targeting African-American families and neighborhoods for sub-prime loans. For more on that, click on this earlier story.
Attorney Steve Barlow says many of the former owners of these homes were doing just fine until lenders came along and convinced them to refinance or take on a second mortgage. An adjustable-rate loan that meant more cash in their pockets right away in exchange for a sky-high mortgage rate later. What's left for all to see is foreclosure after foreclosure.
Memphis mayor A C Wharton was quoted as saying the foreclosures have caused a big loss in property tax revenue. The piece also cited a statistic that between 2005 and 2008, the city lost 7,000 homeowners, two-thirds of them due to foreclosure.
Closer to home, the Mid-South Peace & Justice Center has begun filming what it calls "Blightwatch."
In this particular video, Peace & Justice showcases a home at 1253 Capital now owned by JP Morgan Chase. But the firm hasn't paid city or county property taxes on the home in the last three years, a debt that amounts to $2,099.27 in unpaid taxes.
That might not sound like a lot, but multiply that by the number of similar foreclosures and it starts to add up.
If you couldn't make the Mid-South Peace & Justice Center's forum on foreclosures and blight several weeks ago, they've been gracious enough to post a five-minute presentation on the subject to YouTube.
A few years ago, as part of an annual clean up in Orange Mound, MIFA's Handyman volunteers noticed a vacant shotgun house.
"It had been boarded up before, but it never stayed," says Mary Claire Borys, manager of the Handyman program. "It kept getting broken into; people were setting fires in it. ... We thought we'd give it a shot at boarding it up."
Instead of putting a piece of blank plywood over the windows, the volunteers decided to experiment with an "artistic board-up," painting a mural on the plywood.
It's something that groups all over the country are experimenting with, either by painting murals or painting the plywood to look like windows or doors. They say it makes vacant properties less likely to be broken into.
"You can drive by these places and not even notice it," Borys says. "It helps lessen the effect of vacant property on communities."
The Mid-South Peace & Justice Center also has estimated that, b/c of the prevalence of fires in vacant and abandoned homes, it's more cost effective to board up the properties. A board-up costs the city about $600 while each fire costs the city about $17,500.
Though boarding up is mostly the purview of property owners, Blue Crush, and the city, MIFA is looking for public or private grant money to help them paint the plywood for those groups.
"We're hoping to get something started by this fall, even if it's just a bundle of houses to show what it would look like," Borys says.