Monday, December 03, 2007

Foreclosures: An Economic Tsunami in Michigan; MECAWI Protests at MGM Casino Hotel

Foreclosures: Economic Tsunami

A coalition organized by MECAWI demonstrated in front of the MGM casino Tue. Nov. 26 calling for Gov. Jennifer Granholm to declare a state of emergency because of the foreclosure crisis hitting Michigan cities

By C. Kelly
The Michigan Citizen

DETROIT — The United States Conference of Mayors held a private meeting with financial institutions and nonprofits to talk about the foreclosure crisis sweeping America. Mayor Kwame Kilpatrick hosted the meeting in Detroit on Nov. 27 at the MGM Grand casino hotel. In 2008, Mayors expect to see 1.4 million foreclosures and a continued property value loss of $1.2 trillion.

“All over, people are trapped in bad mortgages,” said Mayor Kilpatrick, who called the foreclosure crisis the “economic tsunami of America.”

Mayors seemed stunned at the breadth and complexity of the foreclosure issue and its effects on neighborhoods and cities. Many have described the foreclosure crisis as an international fiscal disaster with severe local implications. From predatory lending, global financial markets, city, county, state, federal tax implications and a falling dollar affecting a city’s ability to bond, the foreclosure crisis demands attention.

Kilpatrick described it as a “multi-layer, complex issue.”

With an already shrinking tax base, the foreclosure crisis makes it increasingly difficult to manage city and state budgets. According to the Mayors report, “the aggregate loss in tax revenue equals $6.6 billion.”

For cities such as Detroit and states like Michigan that have already struggled to balance budgets and make difficult cuts, more could be on the way. Michigan could face a potential $111 million dollar property tax hit. And a $12 million sales tax loss.

In Detroit, 3000 homes were listed for sale under $30,000.

For many who believe the crisis is only affecting Detroit, relief will not be found in the suburbs. Oakland county is reeling.

According to an Oakland County Commission report in November, home values have dropped almost six percent lowering county tax revenues. According to a Nov. 25 New York Times article by Keith Schneider, a Bloomfield home was purchased for $2.1 million in 2006. The buyer never moved in because of financial difficulties and the house is now currently on the market for $975,000. Whether or not the owner will fetch the current asking price is still unknown.

Lansing mayor Virg Bernero said the foreclosure crisis has only just begun. “It is a city, suburb, Black, white problem.” He also said the neighborhoods are now only “pockmarked” but could expect to be further devastated.

Most of the Mayors agreed that the federal government will need to step up.

Jerry Goldberg of Michigan Emergency Committee Against War & Injustice (MECAWI) held a demonstration at the mayors foreclosure meeting.

“We are protesting because Mayor Kwame Kilpatrick is holding a meeting of mayors across the country but unfortunately it is a closed meeting. We think this is rather outrageous since the banks are behind the foreclosure crisis. The mayors should be meeting with the people to understand the depths of the foreclosure crisis,” said Goldberg.

“Maybe they are hoping people come to the casino so they have a prayer to pay off their mortgages,” said Goldberg about the MGM meeting site.

Goldberg also characterizes the foreclosure issue as a disaster.

“What is needed is a broad solution that recognizes the depth of this emergency. When you have a flood or fires that destroy very expensive homes you have a State of Emergency. We have a man-made state of emergency,” said Goldberg who believes this issue requires legal remedy.

Goldberg is asking the mayors of Michigan to call on the governor to declare a State of Emergency. Goldberg says the State of Emergency, extended during periods of crisis, could allow homeowners to keep their homes until there is a larger remedy.

A legal analyst for the state of Michigan believes this might only apply to tax foreclosure, not necessarily bank foreclosure.

Many say the level of predatory lending experienced by Blacks could almost be described as a hate crime. According to the Federal Financial Institutions Examination Council, Blacks are 2.3 times as likely to get high cost sub prime loans. In Detroit 70% of loans were sub prime.

Goldberg encourages those experiencing foreclosure to call Michigan Legal Services or have other legal representatives look at their mortgages.

Goldberg said Black and poor people have especially been “victimized” by predatory lending and may have an option for legal recourse.

The Conference of Mayors also encouraged homeowners to reach out for help. They say 50% of those who need help never talk with their lenders.

At the press conference Tuesday, they announced a hotline for homeowners in trouble.

Kaleemah Sumareh, a 55 year-old Detroit resident and Marygrove undergraduate student, attended the closed door portion of the Mayors’ event.

“I was struck by the level of intensity and heightened sense of alarm from the Mayors,” said Sumareh. “The description of this crisis—as an economic tsunami—is apt. I will do what I can to be active.”

The Mayors hotline number is 888-995-HOPE. Michigan Legal services can be reached at 313.964.4130. The MECAWI community meeting calling for a Moratorium on Foreclosures and Utility Shut-Offs will be held Dec. 8 at Central United Methodist Church in Detroit. For more information call 313.319.0870.

What is a subprime loan?

It is a type of loan that brokers put people in that would not normally qualify for an "A" type loan. Many times this is because they have deflated credit scores and that causes them to slip out of the prime market.

What most people don’t realize is that these loans are very expensive. They have higher interest rates, higher closing costs, prepayment penalties and higher monthly payments.

It is crazy... take someone that is on the fence to be able to qualify for a mortgage and stick them in a program that is designed to fail.

If you are in this type of a mortgage and need foreclosure help please contact us for a free consultation. We would love to be able to see what other options may be available to you.

–American Foreclosure Specialiasts

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