Neighborhood Foreclosure

The following was sent to me early this morning and appears on the Illuzi Letter, which is not one of my usual reads.

As Bank Foreclosures Rise In Buffalo, Judge Nowak Says, "Hold On," While Wall Street Sneezes

A reporter pays a visit to Buffalo City Court Judge Henry Nowak's Housing Court and is surprised by what he finds. Instead of a long line of home owners whose houses need work to pass inspection, what he finds is a long list of home owners being foreclosed on by out of town financial institutions such as Wells Fargo and Deutsche Bank.

What's going on here?

In fact, its the local version of a syndrome which has seen foreclosures increase in many parts of the nation. Even more interesting, it's appears to be a symptom of a disease which is a big part of the reason for the head cold currently afflicting Wall Street.

According to Executive Director Aaron Bartley of PUSH Buffalo, it's all part of a get rich quick scheme being resorted to by Wall Street firms which can inflate bottom lines temporarily while it devastates cities like Buffalo.

"What these firms are doing is entering into mortgage agreements with individuals in cities they never visit with provisions that include increases in monthly mortgage payments which they know these people are going to have a hard
time paying," Bartley explains. "Then they foreclose on the properties when these people can't pay and then they abandon the properties, adding to the roster of totally neglected homes in a city like Buffalo."

Meanwhile, these financial firms have very often sold bonds based on the value of the inflated mortgage payments that are technically owed to them, but which they know are worthless because the mortgagees are unlikely to be able
to pay.

"This is the cause of much of the instability you are seeing on Wall Street," Bartley explains. "These firms are selling bonds that are worth little or nothing, leaving investors holding the bag, which in turn, leads to inflated stock values which soon plummet."

Meanwhile, back in Buffalo, these shenanigans have led to a crisis in some inner city neighborhoods which have seen whole blocks of homes foreclosed on with no end in sight...at least until recently.

"A recent ruling by Judge Nowak has the potential to stop this nonsense in its tracks," says Bartley. "Judge Nowak ruled that a bank can not foreclose on any property in the City of Buffalo if that financial institution has outstanding judgments against it for non-payment of fines related to neglect of the properties it already controls...Clearly, this decision, if it's not reversed, will force this firms to at least maintain these properties or else not beso eager to foreclose."

Currently, Bartley and his number two, Eric Walker, are looking this issue to see what companies such as Wachovia and Fargo are doing with all these properties that are falling into their hands.

"For example, Wachovia has foreclosed on 561 properties since 2002 but has only sold 18 of them, according to the records we have seen," Bartley reports. "We are going to find out what's going on with all these properties and
we'll let the community know."

I understand that Judge Nowak - Buffalo's next mayor? - will be presenting the Deutsche Bank case during one of the sessions at next month's Reclaiming Conference in Pittsburgh, sponsored by the National Vacant Properties Campaign. If you want to put your finger on the pulse of the most amazing set of issues impacting our cities, check 'em out. Conference schedule - right here.

Check out PUSH Buffalo

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