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facing
the
foreclosure
crisis
in
greater
cleveland
:
What happened and how communities are responding
This report was produced by the Federal Reserve Bank of Cleveland.
Te views expressed herein are those o the individual authors; they do not necessarilyrefect those o the Federal Reserve Bank o Cleveland or the Federal Reserve System.
The oreclosure crisis is among the most signicant challengesacing American cities today. It has been dicult as a nation toassess the damage to housing stock, neighborhoods, and communi-ties, let alone decide upon strategies to repair and move orward.As new oreclosures continue to mount, their impact spreads romcentral cities to places that initially seemed immune. Indeed, weuse the term “oreclosure crisis” broadly in this report, including thesubprime lending meltdown, oreclosures themselves, and spillovereects such as vacant and abandoned properties as elements o thiscrisis. In the midst o any crisis, it can be dicult to step back, takestock, and begin to mitigate the damage. But leaders in NortheastOhio have done just that, acting quickly to develop and launch initia-tives, both innovative and collaborative, in Cleveland and CuyahogaCounty to address the crisis. Cuyahoga County may be the epicentero the oreclosure crisis, but it is also nationally recognized as a placeaggressively working on many ronts to make its way orward.Using data that track properties rom loan origination through ore-closure, REO, and disposition, this report documents the unoldingo the oreclosure crisis in Northeast Ohio and the enormous tollto date. The report also documents some o the multi-aceted localresponses. Sidebars contain stories o community leaders, organiza-tions, and agencies that have come together to begin repairing thedamage and prevent properties rom urther demise.Cleveland is an opportune subject or study or three reasons. One,the crisis emerged here early and with starkly visible impact. Indeed,media attention rom around the world has ocused on Cleveland—inparticular the Slavic Village neighborhood that has been devastatedby predatory lending, oreclosures, and vandalism. Two, Cleveland’sstrong community development organizations were well organizedand ready to respond promptly to the crisis. Having weathered theloss o jobs and exodus o people to the suburbs, Cleveland hadalready begun tackling the challenges o vacant housing and ashrinking city. It was one o the rst sites in the nation to work withthe National Vacant Properties Campaign, creating a blueprint orstrategically addressing neighborhood revitalization. And three, localresearchers, building on their longstanding involvement in housingand neighborhood studies, were well positioned to do timely researchon the dynamics o the problem and to document the array o responses. Their research, in act, orms the basis o this report.The problems o weak-market cities—those that ell behind ineconomic and population growth, suered a resulting over-supply o housing, and are now among the hardest hit by this crisis—may seemintractable. Yet our chronicling o what happened in the Clevelandarea suggests that the latest blow to these vulnerable communitieswas not inevitable. We show, or example, that a huge expansion o subprime credit took place in communities that previously had verylittle access to credit. These subprime loans oreclosed at a muchhigher rate and triggered an avalanche o vacant properties, manyo which have been abandoned by lenders or sold to speculators atextremely distressed prices.Despite the severity o the problem here, Clevelanders have exhibiteda strength and willul perseverance, exemplied by the city’s multi-aceted, coordinated, and extensive response to the crisis. JournalistAlex Kotlowitz visited several hard-hit cities across the country beoredeciding to write about the devastation in the Slavic Village neigh-borhood o Cleveland. (His article “All Boarded Up” was publishedin the
New York Times Magazine
on March 8, 2009.) Kotlowitzreturned to Cleveland in June 2009 to participate in a orum on theoreclosure crisis. At this event he explained why he chose Clevelandto prole: It was “the one place in the country where I saw peoplepushing back.”This report is Cleveland’s story. The outcomes are uncertain and thepath ahead is still very dicult. We eel there is decided value insharing our story now, while the crisis is still playing out. The valuelies in what Cleveland’s example can contribute to other communi-ties’ eorts to deal with oreclosures and their atermath. We alsohope that our story can urther policy discussion about what will beneeded in the uture to avert another such crisis.We are grateul to have partnered with the Federal Reserve Bank o Cleveland to produce this report. I crisis indeed breeds opportunity,now is an ideal time to build knowledge about collaborative strate-gies, policies, and programs that contribute to sustainability ormetropolitan areas.
June 2010
“You’ve seen things, you’ve heard things,and you’ve elt things that most o us haven’t,”
journalist Alex Kotlowitz pointed out.
“It is incumbent on you to share [that] with therest o the country. In your hands is not the utureo one house or one block or even one city. You need to be the guides. I urge you to give voice to what you’ve seen.”
Letter rom Claudia Coultonand Kathy Hexter
Kathryn Wertheim Hexter, let, rom Cleveland State University andClaudia J. Coulton, PhD, rom Case Western Reserve University
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