Foreclosures Prompt Cities to Make Plea for Aid

[Joseph Burkeson, CMI]

Foreclosures Prompt Cities to Make Plea for Aid

January 24, 2008
NY Times - By IAN URBINA

WASHINGTON — Facing a collapse in the subprime mortgage market that has pockmarked their cities with vacant houses and crippled their budgets, the nation’s mayors pleaded Wednesday for a huge infusion of federal aid.

As more than 250 mayors gathered in Washington for the winter meeting of the United States Conference of Mayors, many agreed that the collapse of the subprime market had left a growing problem of vacant houses, depressed property values, tighter credit, and a need to cut services to close municipal budget gaps.

“It’s an economic tsunami that is hitting our cities,” said Mayor Douglas H. Palmer of Trenton, the president of the conference. “We need federal action not six months from now, but within the next 30 days.”

The conference called on Congress to raise the limits on loans bought by Fannie Mae and Freddie Mac to stimulate the mortgage market, and increase Community Development Block Grants to help stabilize neighborhoods.

In December, the conference released a study that said that home values would drop by $1.2 trillion in 2008, hitting city budgets the hardest. States are also beginning to suffer; on Wednesday, the Center for Budget and Policy Priorities in Washington reported that at least 16 states had predicted budget shortfalls for 2009 totaling over $30.1 billion.

“We’re the ones left boarding up these places, cutting their grass, doing demolition on the abandoned structures, picking up the trash, making sure no one breaks in,” said Mayor Frank Jackson of Cleveland.

Cuyahoga County, Ohio, which includes Cleveland, has more than 16,800 homes that have been abandoned because of foreclosures.

“Anything from the federal government short of a massive infusion of resources into urban centers to rebuild infrastructure and pay for services is too little, too late,” Mr. Jackson said.

Speaking to the group, Robert E. Rubin, a former Treasury secretary, urged the mayors to be more aggressive in pressuring Washington for strong federal action, particularly in reviving the housing market.

Mr. Rubin said the government needed to provide more aid to homeowners struggling with mortgage payments.

The subprime mortgage problem has left many cities scrambling to cut services to try to close budget gaps.

City officials in Sacramento have responded to a $55 million projected budget shortfall for next year city by ordering an immediate hiring freeze and an end to some discretionary spending.

In Virginia, Fairfax County is facing a $220 million deficit for the coming fiscal year and is considering cuts to school districts.

This month, Baltimore’s mayor and City Council announced plans to sue Wells Fargo Bank, contending that the bank’s lending practices discriminated against black borrowers and led to a wave of foreclosures that has reduced city tax revenues and increased its costs.

Cleveland has sought monetary damages from 21 lenders.

“By driving down the value of nearby homes, foreclosures also drive down city revenues and place additional financial burdens on the city and its residents,” said Mayor Sheila Dixon of Baltimore. “It is our responsibility to do what we can to stop it.”

Mr. Palmer said the conference had not taken an official stance on the issue of cities suing lenders. He said that Trenton had had a 14 percent increase in foreclosures in the past year but that suing did not seem prudent because litigation would take at least two years.

He said cities should require lenders to pick up the cost of upkeep for abandoned properties after foreclosures occur.