US mortgage mayhem leaves rows of houses empty & eager

Vacant homes being maintained in hope of resale and to avoid property price collapse in neighbourhoods

In a sign of the spreading economic fallout of mortgage foreclosures, several suburbs of Cleveland, one of the USA’s hardest-hit cities, are spending millions of dollars to maintain vacant houses as they try to contain blight and real-estate panic. Officials are installing alarms, fixing broken windows and mowing lawns at the vacant houses in hopes of preventing a snowball effect, in which surrounding property values suffer and worried neighbours move away. The officials are also working with financially troubled homeowners to renegotiate debts or, when eviction is unavoidable, to find apartments.

“It’s a tragedy and it’s just beginning,” mayor Judith H Rawson of Shaker Heights, a mostly affluent suburb, said of problem, fuelled by a rapid increase in high-interest, subprime loans, a secondary market where loans are given to those with poor creditworthiness. “All those shaky loans are out there, and the foreclosures are coming,” Rawson said. “Managing the damage to our communities will take years.”

Cuyahoga County, including Cleveland and 58 suburbs, has one of America’s highest foreclosure rates, and officials say the worst is yet to come. In 1995, the county had 2,500 foreclosures; last year there were 15,000. Officials blame the weak economy and housing market and a rash of subprime loans for the high numbers, and the unusual prevalence of vacant houses. Foreclosures in Cleveland’s inner ring of suburbs, while still low compared with those in Cleveland itself, have climbed sharply, especially in lower-income neighbourhoods that border the city. Hundreds of houses are vacant because they are caught in legal limbo, have been abandoned by distant banks or the owners cannot find buyers.

“What makes the subprime mortgages so devastating is that they’re so concentrated geographically,” said Dan Immergluck, professor, Georgia Institute of Technology. Rosa Hutchinson Yates, 62, had kept up payments on her two-story house for 30 years. Now, she may well lose the house because of a disastrous refinancing deal in 2003 that brought her $24,000 in cash but bills she could not pay. In 2006, she stopped making payments and the lender started foreclosure proceedings. Yates, preparing for the worst, has learned that she can move into a subsidised apartment for retirees. But the thought is devastating. “When folks pay for a home, they expect to die in it,” she said, breaking into tears