Cleveland savaged by tragedy of home foreclosures

CLEVELAND, United States (AFP) - The US dream of home ownership is going up in smoke in Cleveland, now littered with broken promises and lost hopes as it tops the nation's tragic roll call of foreclosures.

In the first seven months of this year, there were 13,600 foreclosures in Cleveland and Cuyahoga County alone, compared to just 7,000 for the whole of 2006, and 3,400 in 1995, said county treasurer Jim Rokakis.

In this area, there have not been so many sheriff's sales since America's Great Depression in the 1930s.

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Just about everyone I talk to are having problems with mortgages. It goes back to a few years ago when financial institutions offered very low interest mortgages. Those 4-5% variable rates are up as high as 9.5%. In 2004 a $200,000 interest only mortgage cost $667 per month. The same mortgage today at 9.5% cost $1,583 per month. A lot of people got suckered-in.

But not today...

I don't think anyone got suckered. I think they made bad decicisions and are now having to face the concequences. No one made them take out a mortgage with an adjustable rate. 30 year fixed mortgages have been at all time lows for over 5 years.

Instead these people decided to buy a house they could not afford unless interest rates stayed at historic low levels. They chose ignore the fact that rates had no where to go but up.

We need to end this victim mentality. "I made a bad decision therefore I have somehow been cheated or wronged" No, you made a bad decision becasue you didn't ask enough questions and you wanted to buy a house you couldn't afford.

I'm not a mortgage broker and I'm not a realator. I'm just sick and tired of people making bad decisions and then passing the blame onto someone else.

I'm now stepping off my soap box.
Thanks

While I would agree with your comments that we as inndividuals must take personal responsibility for our actions I don't think the lending institutions should get a free pass.

Why is it we are so willing to accept the mandates of corporations who have shown time and time again that their main concern is maximum profits the consumer be dammed. People will take risks when there are no safe and reasonable options open to them.

Your average income earner is becoming less and less able to purchase a house. Yet corporate profits continue to grow. It is not even a question of fairness, this is not sustainable.

I would like to see a restructuring of the basic loan agreement with more of a focus on front end amortization. This would allow lending institutions a sane profit and stop squeezing out the middle class.

This will never happen as long as there are those willing to place the blame totally on the consumer.

The problem with what you just said is you assume the loan itself is bad, it's not. There are people who wisely used an adjustable rate loan to meet their needs. Should the people who use the tools available to them wisely be penalized because others used them unwisely?

As far as your observation that "corporate profits continue to grow" do you see this as a bad thing? Sometimes people forget who "corporate profits" benefit. It is not just some fat cat smoking a cigar that benefits. You and I benefit through our 401ks through our personal savings and from others having money to buy goods and services.

I would caution anyone that would fall into this class war mentality that thinks corporations are bad and the poor defenseless common man has no say in whether or not he or she gets screwed. It is that sort of thinking that prevents those who may be having a hard time from finding the spirit to lift themselves up.

If your mortgage goes from $677 to $1583 (per James Kirk) does it encourage "that sort of thinking that prevents those who may be having a hard time from finding the spirit to lift themselves up"? If that happens, and you were barely making it with the $677 mortgage payment how do you get the "spirit to lift yourself up"? Do you find it in a bottle, or a funny cigarette? Do you get a second job at Wal-Mart's, or a gas station?

Or do you get realistic, think "I got suckered", and file for bankruptcy (if you can)? The mortgage company gets their property back which they can put on the market for another sucker, and you go back to renting until you get together the down-payment for another loan (perhaps for a cheaper piece of property, or with a fixed rate of interest). Myself I would never, ever take an ARM even though I pay more with a fixed rate. And I don't feel sorry for some fool who did. They deserve what happened by trusting capitalists trying to maximize their profit.

Old South End Broadway

TTol...The loan is not bad. It merely beneefits those working for the lending institutions and a certain portion of the population. Do you deny that fewer people are able to afford buying a house than twenty years ago?

I reject your characterization of my thoughts as class warfare. I believe that there is an ever increasing dominance in business for greater and greater profits that is ultimately not sustainable. Simply put, it is called greed. And to a growing population it is becoming an addiction.

I have had several businesses in my lifetime where I provided services for the upper classes. The vast majority with whom I did business were decent, honest and generous, some of them had no class. I have also met "poor" people that were high class.

As an entrepeneur, I'm keenly aware of profits. I believe that more and more corporations have crossed the line of ethical profit margins. Do you believe in the concept of ethical profits?

...thirty years ago most people were secure in their employment. That is no longer true. The two houses I bought were bought on 15 year mortgages with 20% down. The second house was paid off in about five years with double and triple payments on the house. Both houses had values of under $30,000. I know, cheap, but that is what I felt comfortable paying for, and there were family considerations (my parents already lived there). There is plenty of "cheap" housing in the Old South End. If you're making $40,000 or less a year that is probably what you can afford (especially if you don't want to be on the hook for the next 30 years).

Life is a gamble. You set yourself up as best you can. If you have a profession (or a good union job) where you are making $60,000 or more a year you can afford to "take a chance". You have more "disposable income". We all need the basics. We must spend a minimal amount on food and clothing. Anything extra can go for the down payment on a house, and then the monthly payments. Of course, if you aren

Old South End Broadway

TTol...I guess I will have to make this as simple as possible for you. As I have stated before, I agree with your premise that people have to take personal responsibility for their actions Can we move beyond this point? The loans are NOT bad, the companies are NOT evil and I never said they lied. I don't believe in class warfare. Having an addiction (an unsatiable dedire)for greater and greater profits is not evil and not sustainable in the ling run.

Do you have the courage to move betond theses tiresome points. Do you have the courage to answer my question? Do you bellieve in the concept of ethical profit margins?

A productive discussion ensues if one doesn't consistantly misconstrue the other"s words.

I have a distrust of those who seek profit. I always count my fingers after I have shaken their hand. I assume that, like democracy for government, it is the worst of all economic systems, but it is what comes closest to giving good to the greatest number (if they can learn to play by the "rules").

If you look at your short-term self-interest then Wal-Mart's gives you the most "bang for the buck", but if you look at your long-term interests then your local retailer might be better for the community. Who gets a bigger profit margin per unit off their product? The local retailer. Who is likely to stay in the community rather than leave when it's picked clean? The local retailer. So if an "ethical profit margin" means a smaller percentage then Wal-Mart is "ethical", but will they be here 50 years from now? Will they stay through hard times as well as good? Not likely.

Old South End Broadway

I don't think that an "ethical profit margin" is necessarily the smallest. (After all, a company could make a larger profit by shafting its employees or skimping on safety measures...not exactly ethical behavior.)

I think that my own definition of an "ethical profit margin" would be somewhere in the middle - where the employees receive a reasonable wage for the job they are doing, yet customers aren't being charged through the nose either. Something that allows the company to stay in business and serve the community, but doesn't treat customers and/or employees unfairly.

(Don't know if that's anywhere close to the "official definition," but that's what comes to mind when I think about what an ethical profit margin might be.)

Thanks Sarah for your comments. You've got the right idea. An ethical profit margin is neither the lowest or the largest. It's ethical.If anyone has trouble understanding this you may want to examine your tenants and come up with a definition or redefinition of ethical behavior.

I am aware that regulations and legislation cannot create ethical behavior. In fact, they tend to have the opposite effect. Unethical people will generally do the bare minimum of what is required of them.

I think you have a pretty good beginning for an "official" definition of what is an ethical profit margin. Can I quote you?

"The courage to move beyond these tiresome points?" Yes, I do. I've moved on from all of this.

My original post was related to personal responsibilty. I made that post in response to someting James said. Despite your repeated claims of the importance of personal responsibilty you seem to put the blame on the company. I disagree with you on that.

Furthermore, if your definition of "courage" is participating in a blog debate with you I would strongly suggest you do not know the meaning of that important word.

...it may be ethical to charge as large a profit as the market will bear. There is more than one business "model" to stay in business. One business "model" is to promote mass consumption of products, and provide them at the cheapest price per unit with the smallest profit per unit, but trying to get as close to a monopoly as legally possible. Another model would be maximize profit, and cut the units of production or sales to the minimum. Which would be better environmentally? I am betting the second would be because it would reduce consumption of units to those who really were willing to pay for them. Now it might cut the total products of a company, and it might be less efficient, but as long as the company as a whole were making an "ethical" profit wouldn't it help sustain the environment?

Old South End Broadway

Someone who (as you put it) could barely make it with the $677 mortgage payment was a fool to buy that house on an ARM to begin with. Geez...you know your payment is going to go up eventually! If they couldn't afford the low range of their payment, then they should have just bought less house!

I hate ARMs for myself (I prefer the known vs. the unknown), but I do know a few people who used them properly and did just fine. But I can't even begin to imagine what some other people were thinking when they jumped on that bandwagon.

I disagree with your premise that the companies are evil. Did they provide a product that peopole used incorrectly, yes. Is that a crime, no.

In order to believe these companies did something wrong you have to believe they lied. They didn't.

It goes back to my original belief that there were no surprises in these loans. People chose to either not read or did not get help to understand what they were purchasing. Who's fault is that?

I'll ask my question again, should those people who used adjustable rate mortgages correctly be prevented from doing so because other's used them incorectly?

You asked if " I deny that fewer people are able to buy homes than 20 years ago?" I absolutely deny that. That is not true. Today there is a higher percentage of homeowners in this country than during any other period of time. I would agree that people want to own a house that is nicer than they can afford and that is the cause of our current problems.

Since when is buying a home with an ARM the last resort? There's a lot of things people need, but your own house is not one of them. If the only loan you qualify for is a 2/28 ARM, you should be renting, not buying.

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"When I say your dumb name, please stand up briefly, but then quickly drop to your knees and forsake all others before me." -Ignignokt

There's a city full of walls you can post complaints at

Baskin Robbins had so many flavors I couldn't help myself. We need a law to limit flavors to two or three to protect my waistline. For those of you with self discipline, sorry.

Twenty years ago you had conventional or FHA/VA. Regardless of the reason, nicks on your credit meant you buy your home on land contract or not at all.

Now we have choices though some of them are disappearing quickly. When a subprime program has a 5% foreclosure rate, that means 95% were able to purchase or refinance a home successfully that otherwise wouldn't have been able to. If you are falling out of an airplane and someone won't allow you to use a parachute because there is a 5% chance it won't work most people will have a problem with that.

A few years ago when many of the current problem loans originated, you could get a 2/28 or 3/27 subprime mortgage for a .75% to 1% lower than a 30 year fixed. I haven't made a loan to a minor yet and I am pretty sure most of them have been able to read. The documents are full of legal junk, but the part about the rates is pretty clear. I can show you your options and tell you in no uncertain terms that a 560 credit score is probably not going to improve enough in only two years to refinance into a better program, but ultimately the choice belongs to the borrower. If you are "suckered in" with the laws that are already in place, no new law is going to help you.

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