Cities are stuck in mortgage meltdown
TEXT OF INTERVIEW
BOB MOON: We have told you ad nauseam now about how the subprime mortgage crisis has been, and still is, rocking Wall Street and financial markets all around the world. But the losses hit even harder at home -- in the communities where foreclosures occur. The U.S. Conference of Mayors put out a detailed report today, forecasting just how badly cities are being affected by the housing slump. And here's another one of those stomach-turning numbers. All tolled, the loss in economic output for more than 300 cities will equal $166 billion. Jerry Abramson is the mayor of Louisville, Kentucky. Right now, he's in Detroit, where he's huddling with fellow city leaders who've gathered there from around the country. Hi, Mayor Abramson.
JERRY ABRAMSON: Good to be with you, Bob.
MOON: Tell me, what toll has the subprime mortgage crisis taken on your community already?
ABRAMSON: Well, in my community, as an example, last year we had a little over 2,000 foreclosures. In Louisville, we're a city of 700,000 people, we've already had over 3,500 as of last week.
MOON: What does that look like in cities across the country?
ABRAMSON: Unfortunately for the last 20, 30 years, mayors have been beating on the drum in Washington and in our state capitols, focusing on inner-city difficulties, where you have major disinvested neighborhoods and foreclosures have occurred for those who live in those disinvested neighborhoods. What's happened this time is it's now effecting the middle class.
MOON: And we're going to see a lot of neighborhoods that aren't used to having a lot of vacant homes, have vacant homes?
ABRAMSON: Well, those are the calls that mayors are getting across the United States. What the mayors are most concerned about is what happens to those homes when the foreclosure begins and ultimately ends. Meaning that the home is left. Quite often it's vacant. Uh, the weeds grow. The grass grows. The windows get broken. Uh, we have to go in and clean up the property. You end up putting a lean on it, and generally fall behind the bank with the foreclosure and the bottom line is we get nothing. Taxpayers cover the expense.
MOON: This report paints a pretty dim picture of economic loss for a lot of cities. If the economic loss is so great, I wonder what the likelihood is that it's going to hurt your credit ratings?
ABRAMSON: Well there was concern raised by at least two of the mayors, about that issue. As the decrease in value occurs around homes that are being foreclosed on and left vacant or boarded, all of the sudden the property tax decreases. We've got to put more money into going in and policing the area. We've got to put more money into going in and keeping them boarded up and as safe as can be possible. While we're trying to find the people that own the paper. That's the interesting thing. It's not the local banks that we're focusing on. We're trying to find the individual who ultimately sold that mortgage to, or packaged it and now it's at Countrywide, or it's Wells Fargo, or it's Deutsche Bank, or U.S. National Bank, none of which have locations in most of our cities. And they're the ones we're trying to connect with to ensure that we try to keep up the house, so that it keeps up the neighborhood, and it doesn't have a negative effect on the surrounding area.
MOON: The headline on one of the stories I was reading this morning said that you're all meeting in Detroit to figure out how to blunt the impact of this foreclosure crisis. Have you come up with any ideas, and is there really much you can do when the experts say basically this is a runaway train, it's already on a crash course.
ABRAMSON: Well the one thing that came very clear to us was that the individuals that didn't show up, that were not around the table. The realtors were here, the mortgage bankers were here, the bankers were here, the servicers were here, the nonprofit companies were here. But the group that was not here, is not here, is Wall Street. We'd like to see the Wall Street syndicators, who made enormous amounts of money off these exotic packagings that they've developed, work with their servicing organizations, like the Wells Fargos and the Countrywides, to give them the flexibility necessary to work with American citizens to get through this crisis by, if having to, leave the interest where it is, put the extra dollars on the back of the loan, and allow the folks to continue to live in the property, maintain the property, and keep the neighborhood stable.
MOON: Jerry Abramson is the mayor of Louisville, Kentucky. Mr. Mayor, thank you for joining us. We wish you the best in finding some answers.
ABRAMSON: Thanks, Bob. Thank you very much.