During the real estate bubble, older urban neighborhoods across the nation, from Atlanta to Baltimore to Cleveland to Sacramento and countless communities in between fell victim to a devastating plague of predatory lending and mortgage fraud.
This was enabled by Wall Street’s bottomless appetite for financing home loans, lenders’ lax standards and corruption among mortgage brokers and appraisers. Brokers set up borrowers with subprime mortgages knowing they were too big to pay, while organized mortgage fraud rings convinced lenders to issue mortgages for far more than homes were worth, pocketed the proceeds and left boarded-up foreclosed houses behind.
But the bursting bubble has not brought relief to suffering neighborhoods. On the contrary, communities already hard hit by mortgage fraud and subprime foreclosures are now enduring the next wave of profiteering: the selling of vacant and foreclosed real estate to speculators.
A few of the purchasers are doing a service by fixing foreclosures up and renting them out. But far too often the foreclosed homes stay vacant and derelict as they’re flipped from one buyer to another.
In areas with bottomed-out real estate markets, prospectors see an opportunity to profit from devastation. Houses are being resold at tremendous markups — sometimes upward of 1,000 percent — under “rent-toown” contracts, whose holders bear the responsibilities of homeownership but few of the rights. These foreclosed houses are purchased in bulk, sight unseen, by investment companies far away from the community.
The companies selling the foreclosed real estate are the middle men known as mortgage servicers. During the real estate bubble, investment banks bundled mortgages into securities. Servicers work on behalf of investors in those securities, collecting monthly payments from borrowers and distributing the proceeds. But when payments stop coming, servicers move to foreclose — and once the property is vacant, they decide what happens next. Most move to sell it off as quickly as possible, rather than spend substantial sums on upkeep — and on advancing those monthly payments.
In hard-hit foreclosure zones across the nation, servicers have so much real estate to dispose of that they auction it in bulk for as little as a few thousand dollars a property. These fire-sale prices too often attract buyers who exhibit little concern for neighbors or neighborhoods.
All over the country, servicers are dumping property that is uninhabitable and a hazard to neighbors.
As such wreckage accumulates, so do crime, garbage dumping and other ills that
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