Its not just the banks that are to blame, but political correctness and irresponsibility. If you look into what happened, you will find that the history of the development of the crisis looks like the following. Certain groups complain about racism due to that certain group not getting loans, however, the real cause of them not getting loans is their lower credit score due to their own irresponsibility. So, this group whines, and due to political correctness, the bar to getting a home loan is lowered, albeit that the rates might be a bit higher commensurate with the lower credit scores, this is what is known as the subprime mortgage market. Institutions in the loan business see this whining and rather than make a decision based on facts, decide its better to not be perceived as discriminatory. Presto!! People who are otherwise unable to afford a home are given huge loans to buy a house. Ultimately, this is bad for the people who take out these loans, who are now in worse shape than they were before, because they should not have been given loans in the first place and lost the house in foreclosure, in the end, no one is helped by this. The group that was whining about discrimination in lending, is now suddenly whining about predatory lending. The should not whine, they are just not able to meet the responsibility of owning a house, but whining is what they are good at.

Did any of you out there know that it is possible to get a home loan in this country without a Social Security Number? How is this possible? Well, it is possible if you happen to be an illegal alien who broke the law by sneaking into this country (in other words, a criminal), and don't happen to have a SSN. This is another part of the problem. In this case, the lending institution decides that illegal aliens, irrespective of country of origin, are somehow an "untapped market" and loans are made to the criminals who crossed the border illegally.

http://michellemalkin.com/2007/11/27/mr-shakedown-milks-the-subprime-meltdown/

http://money.cnn.com/2005/08/08/news/economy/illegal_immigrants/index.htm

Go to Freep.com. The Detroit Free Press is running on on-line series involving a team driving every street in Detroit. Includes interviews and photographs.
Parts of Detroit are going back to prairie.

...out of how many total houses in that area?

I'm afraid I'm not going to have a lot of sympathy for people attempting to live beyond their means.

Or those who provided bad mortgages to them (who are equally guilty in my book).

They contributed to the somewhat insane increase in prices too.

http://media.freep.com/drivingdetroit/stories.html

Its generally a very positive and interesting story... In the heart of the nations worst ghetto... Detroit.. and its very upbeat, unlike some of the people here in Minneapolis, one of the nicest and richest cities in the country.

I smoke black cigarettes...

You know, there are routine murders in North Minneapolis. There are shootings almost every night. Prostitutes and drug dealers conduct business in the open--and have for many years (I witnessed it first hand in 1994). There are other things more pressing than vacant houses.

Your logic is faulty. It is not the fault of the bank if a crime happens on a foreclosed property. It is the fault of the perpetrator of the crime and his alone. I don't know why some people feel the need to assign blame to parties other than the perpetrator.

I read in the St. Paul paper that in North Minneapolis 70% (if I recall correctly) of the houses in foreclosure were owned by investors--not families or individuals. It is the fault of the banks for giving these people loans in the first place. They deserve to take the losses and they will.

Of course, the easy credit inflated the cost of property to absurd levels, and the Democrats on the county board and in city hall have been spending the tax revenue resulting from those inflated values quicker than they could get their grubby DFL hands on it.

In the end, the collapse of the housing bubble will be good. Why? Because young people buying their first homes will pay less. People trading up to bigger houses will pay less. And these people who have mortgages will then have more money in their pockets to spend on other things.

As for buying a home in North Minneapolis, who in their right mind would want to live in a community plagued by routine murders and sky high crime? Ever heard of stray bullets. They can kill.

Global Economic Recession Caused by Whiners.

This will rock the world, especially that part of the world who call themselves actual economists.

If I had a neighbor in foreclosure who had abandoned their home, I'd be organizing the other surrounding neighbors to make sure the house was taken care of: water turned off, the yard mowed, etc.

It's only trespass if they catch you and they're not going to be looking.

Looking at that map, though, it seems to me that there's something fishy here. Either around twenty percent of people in Minnesota are idiots (got loans they couldn't afford or thought low interest rates were a permanent fixture of the twenty first century) or there is some other reason why the turnover in that neighborhood was incredible over the last few years. After all, we are to presume that each of those foreclosures marks a house that changed hands in the last two or three years.

I can not believe the Star Tribune even allowed you to post such a ignorant response. You complain that certain groups of people complain, and that is the cause of the forclosure and mortgage loan problems. Your response is not only naive and disturbing but it disgusts me to know that people still think the way that you do. Let me assume you are a person who never complains to get the outcome of a situation changed but I know in my heart that you have complained yourself for your own justices. With that in mind who are you to comment on a battle you obviously have nothing to do with? If it's not your fight you don't have to come prepared to battle. Leave your thoughts in your own ignorant mind and then grow up.

Just one of hundreds of reasons I will never live in Cleveland. I've been there and it's just a horrible place.

Who names a neighborhood "Slavic Village" anyway? I know Slavs!

and that's the truth.

it would be nice if slicks selling mortgages spent time matching the customer up to the right product, not what had the best margin. when we bought, they tried to sell us an ARM, and we weren't taking any of that snake oil.

slicks selling refinances were pushing ARMs.

and so lots of folks who weren't watching out for themselves and demanding a proper product got stuck with mortgages they can't pay and can't refinance.

weasels + greed so far.

now, the stuck homeowners are facing foreclosure, and they can't get refinanced because many of them are underwater on the loans. they lose, and move out.

-0-

and this is where we sit now. there are folks who would LIKE to buy these foreclosed homes. realtors try and try and try to get to the banks, servicing companies, and just don't get answered.

so now, we add the banks as the new owners who are totally negligent, appear totally unable to deal with their issues, unable to recognize they have to mark the property down on the books and move it... and in their circular wanderings, the property is not watched, neglected, and a place for criminals to hide out among and in.

the problem now, folks, is the banks in these neighborhoods that are spiralling down the drain.

it will get worse as hundreds of thousands of liar loans and big-eyed-buyer loans reset and grow the problem exponentially.

and that's why the banks have to step up and do something, anything.

The housing crisis has probably been going on for awhile. From people I know who live up there they say the northern suburbs are getting more and more people from Mpls. each year renting the local apartments because they are very cheap in comparison to other places especially in anoka-hennepin county. If you can't have a house you have to rent.
Unfortunately, this isn't always good if the rental buildings are in quiet areas that have good neighborhoods and aren't used to urban stuff. It is very coincidental that most of the city type crimes outside of Mpls. that make the news all the time now are occurring in north metro suburbs and not places like Chaska, Lakeville (southern metro towns). I can't count how many times the news says there is a brooklyn park connection to some event that happens.

universal c: I don't blame the banks for the crisis. Or at least not the banks alone. There's plenty of blame to go around in this mess. My problem is with the responsibility for the property now that foreclosure has happened. When you own a property, especially a city property, you have rights but you also have quite a few responsibilities. That's true regardless of whether you are an individual homeowner or an institution. The banks and finance companies know this when they make mortgages and the risk of them having to maintain the properties is built into the mortgage and interest rates they charge. I realize that the crisis is tough on them too but that doesn't mean they can abdicate their responsibility. It doesn't absolve the previous homeowners from blame but they are now out of the picture and have no responsibility. I do know 2nd hand of cases where departing defaulters trash a house before they leave. Unless the owner is willing to go after them, there's probably nothing that can be done about that.

I also don't expect the banks/institutions to be that prompt or excessive about fulfilling their responsibilities, Just basic public safety here, in securing the house and upkeep to keep it from becoming a nuisance. If an individual owner can be held responsible for someone getting injured on his property, why shouldn't an institutional owner? I know it's hard to secure a vacant property but in some cases I don't see the least effort being made. In a vacant house on our block, the house went from homeowner to finance company to county to another finance company ownership. The county had a security guard come by once a week to walk around the property to make sure that no windows had been opened or broken and that the doors were still locked. When one of the finance companies had it, the only time they had a guy come by to look at the property he left the back door open and the next door neighbors had to call around to get somebody to lock the place up before it became a problem. Maybe the finance company was hoping that somebody would torch the place. Totally irresponsible.

I hate to break it to you people who are pointing at Detroit but that was happening LONG before the foreclosure crisis. The Detroit News did a story about one neighborhood returning to vacant fields like that at least 2 years ago. And it was actually an improvement over the past in that the city had a 3 year tear-down backlog at one point, which guaranteed several arsons a night. SW, it's good to know that somebody is committed to the city. It's run by idiots and the property taxes are too high, especially the extent of urban decay you have to live with there.

DFAL, I can't believe that I actually have to argue this but your view of crime in North Minneapolis is overstated. I wouldn't say that murders are "routine" but murders are a bad measure of general crime anyway. Robberies and burglaries are far more likely to happen to most people since there are so many more of them. If you look at the foreclosure map and match it to the crime maps or the spotshotter maps you'll see that it's more than crime that keeps people away. Yes the high crime blocks are full of foreclosures but so are the safer areas. North Minneapolis is at least 1/4 of the map of the city. We are not hearing gunfire every night in every part of North Minneapolis. The problem of course is that reputation of North Minneapolis covers the entire area, regardless of whether you live in Jordan or Bryn Mawr. For years now, there are people who want to live in Minneapolis who would never consider looking in any part of North Minneapolis because of what people think they know about it. I don't blame them for that, but I don't agree with them either. Last week a watch reader contributed a link to a crime map in Robbinsdale. There are parts of Robbinsdale that look a lot worse than my block in North.

The mortgage crisis has little to do with buyer irresponsibility or politically correct reverse racism. Its misleading to put the North Side under a microscope and label this crisis a "minorities" problem, when a map of the Metro Area would show extraordinary foreclosures in every cities' neighborhoods. The common thread is that people's economic situations change (job loss, divorce, disability, interest rate hikes, taxes, etc.) and the mortgage industry abandoned its prior "best practice" of verifying creditworthiness and requiring a substantial owner investment.

The reason why the industry abandoned its common-sense lending practices was its addiction to creating and selling mortgage backed securities (MDS), which successfully hid the excessive risk and passed it on to third party investors who were so greedy to receive high rates that they stopped caring about impending defaults. The thirst to acquire MBS became so charged that the mortgage lender-sellers were forced to beat the bushes trying to find dupes who would sign on the dotted line, and satisfy that MBS pipeline. It no longer mattered whether they could pay back the loan.

Parroting the rantings from a website doesn't further a discussion about how to solve this mess at all. There are probably some scammers, flippers and evil-doers caught by the North Side crisis, but there are many, many more people that are loosing their savings, their investment, their home, their security and even their families because the financial community said they'd be OK if they just signed that mortgage. They were pushing contaminated milk.

It steams me when someone suggests that an individual low-income, minimally-educated, minority fist-time house buyer (the presumed beneficiary of ill-advised political correctness) should have been a better evaluator of mortgage risk than the mortgage lenders, the multinational banks, the Federal Reserve, the investment trusts or the investment rating agencies, who made a trillion dollars on this ruse before it exploded in our faces. Fingering illegal immigrants, the poor, minorities and "those Others" for this disaster fulfills that age old desire to hang a name on the bogeyman, but it doesn't shed much light on what really happened.

I wasn't suggesting the current foreclosure crisis created the situation in Detroit. I lived on the east side of Detroit for 13 years, I KNOW that. It was already bad, bad, bad when I moved there in the late 80's. The Freep series just shows you how bad things can get when a city starts accumulating abandoned property, for whatever reason.
Detroit has, I think, the scariest single example of an abandoned property on the planet: the Michigan Central Terminal. How any level of government has allowed that monstrosity to continue to exist is beyond my comprehension. The continued existence of the Michigan Central Terminal is a monument to bi-partisan political ineptitude and indifference. A google search will get you lots of scary pictures.

That is a lot of homes being foreclosed upon. And some of them are doing this more than once? And North Minneapolis is becoming more like East St. Louis, South Central L.A. and Louisville's West End because of the banks, of all people? Nice one, bankers.

Also, it looks everyone involved in the housing bubble played way too much SimCity when they were younger, and now, with all of those red tacks on this latest map, this section of town now looks like the part of the game where, for whatever reason, a good part of town is set on fire, and there are no fire departments to take of them all.

No such thing as a subprime fire department, is there?

Is not a monstrosity.. that building is freakin awesome. Part of the tragedy of Detroit is all of the buildings that HAVE been torn down. As you say you where a resident of the city begining in the late 80's?? You know that Detroit is full of some of the finest architectural gems in the nation, and unfortunatly, even though a huge percentage of them are abandoned, they are still beautiful, and in my opinion give the city a ton of character.. If they tear them down what is left??? Just a big open field thats gonna fill up with abandoned cars and dead kids. Minneapolis is not gonna turn out like Detroit, its ridiculous to even suggest such a thing. Minneapolis is a wonderful city full of wonderful people, almost every city in the country is going through a "foreclosure" crisis right now, Minneapolis is by no means alone, or near the worst. Things will be all right. As long as YOU pay your bills, you don't have anything to worry about.

I smoke black cigarettes...

I agree re: Mpls. and the Twin Cities in general; we don't have the kind of urban pathologies that destroyed Detroit.
I also agree the Michigan Central Terminal is awesome.
What makes it a monstrosity is that it stands there empty and decaying. Reclaiming it would be a better solution than tearing it down, but I suspect it's way past hope. There was some talk of putting all the casinos there, when gaming first came to Detroit. Passenger trains could drop you off and you'd never actually have to go into the rest of the city at all. There was also talk, if I remember correctly, of moving police HQ there. That didn't happen either. So it's been standing vacant for what-- 25 years? Ridiculous. At least the Book-Cadillac is being rehabbed. Hotel and condos-- cool digs if you can afford it.

Thanks, everyone, for responding so vigorously to the first post in this thread. I've heard this jaw-dropping "argument" before, and am appalled that it has gained such traction. It demonstrates a shocking lack of knowledge of the situation ... and banking in general. In my opinion, it's just the latest way to demonize The Brown Man.

Do you know that you can go to jail for selling used cars to people who manifestly can't afford them? A car. Yet lots and lots of people got very wealthy pushing hideously unfair mortgages and then "packaging" them for unsuspecting buyers. Which transaction has the greater potential to cause harm? To all of us?

Question: how many of you read your mortgage, word-for-word, before you signed it? I didn't. I knew enough to look for early pay-off clauses and default provisions, but beyond that, I relied on my belief that our fair-lending and anti-usury laws actually meant something. Lucky for me, that turned out to be true so there were no surprises when I paid it off early. It's sad that we feel free to castigate those who are just as ignorant as us, and poorer, and just as hopeful of living the American Dream.

Well, I always complain about too-long posts so I'll shut up now.

But remember that banks could get in trouble for DENYING minorities loans too. My personal theory is that it was the perfect storm of conflicting legislation (which led to the bible length document people have to sign to get a mortgage plus St. Alan Greenspan's easy money policies that got us into the mess. You don't really need to know what every term in the loan doc means. All you need to know is the difference between an ARM and a fixed rate mortgage and the date after which you will be paying a different rate to figure out whether this is a good decision for you. I can't believe that many people were that stupid not to understand those things. I think that what happened was that a lot of people engaged in wishful thinking. They assumed they'd be able to renegotiate before the new rate kicked in and that the value of the home would continue to go up. That doesn't really make them different than any other investor who loses their shirt on a bad bet. The flip side is that they can walk away from their house and start over, and as hard is that may be, it's not like they are going to jail. Yes their credit will be messed up but other people will be paying for the consequences of their actions too. These people include the bank and it's shareholders (who should be paying for the bad bet they made) the neighbors who have the vacant house in their midst and future borrowers who will now find it a lot harder to get a mortgage. This last group are the ones who would otherwise have been able to help us salvage the situation we are in buy buying these foreclosed homes and they are now going to be prevented from doing so.

I have to agree with you on how the media and others make the North Side look. Before moving here 12 yrs ago. I went to different areas of the city including St. Paul and said that I would never live any where but North Minneapolis. Driving around the city it discussed me to see some blocks that were so nasty. I would never buy or rent a house in that area let alone raise to children there. I can understand one block being bad with torn up house but not 3 or 4 with in the same area. When I finally made my purchase I chose to live 3 blocks off broadway. We may have had are share of drug houses but with the help of all my neighbors we had them shut down. We even had the bad houses torn down. Some of the kids in the neighborhood wanted and asked the city to put in a small park where the house was torn down and they would not do so. Finally 2 new homes were put there.

After 9 yrs in my home I finally sold it to a White owner. To this day the house is empty and the new owner has done nothing to it. It is an eye sore now and sadden that no new family can live there. I feel sorry for my old neighbors to have to see that everyday. Yes I still in on the North side and love it.

I wonder why no one has asked how come there is really no crime about the South side of town. Oh wait yes there is. They report when something happens to a white bicycle ride and then when the black detecives find the killers they suspend them. But they have the police man who beat kids while working at 3 area North side schools as their spokesman. Wow go figure.

I can tell racist black people just by the way they type.. This is interesting

I smoke black cigarettes...

and have no sympathy for those that are being foreclosed upon. They are dragging the economy down for thier stupid and selfish actions. I think they should go to jail.

I smoke black cigarettes...

The assumption that all of North Minneapolis is plagued by murders & other crime is flawed. Like any community, there are pockets of high crime and other neighborhoods that are much safer. In many cases, only a few blocks will make the difference. Take a look at the area of North Minneapolis south of Broadway from Fremont to 94. Old Highland and other neighborhood groups have preserved this area while making it a very desirable place to own a home. I wouldn't want to live anywhere else.

:But remember that banks could get in trouble for DENYING minorities loans too.:

I work for a bank. I know these laws, and I can tell you that the sub-prime mortgage mess didn't get started because banks were afraid of running afoul of the government. Are you kidding? They made these loans because they made a huge pile of money off of them, and then moved the risk of nonpayment down the line to someone else.

Does anyone really believe that banks trembled at the wrath of The Gov'mint? Do you think that the government made banks issue loans without checking income? Without checking job status? Without performing any due diligence at all to determine whether the loan could be repaid? Do you think that The government forced banks into writing crippling early-payment and default penalties into their mortgages? Are we really so anti-government that we believe that it forces financial institutions into making mind-bogglingly bad credit decisions?

The fact is that the lenders didn't care. They thought that the credit boom would last forever. And they sold millions of these loans in packages that were supposed to dilute the risk. Ha freakin' ha.

And as for people not understanding ... I challenge you to read your mortgage and tell me exactly what it all means. Go ahead. Try. And while you're at it, pull out your credit card agreements, too. Oh, you didn't read that, word-for-word?

Look, I'm not saying that there was no fraud or greed or stupidity on the part of the folks who took out these mortgages, but to put the bulk of the blame on them for this mess ignores reality, and diverts us from the real problems here: criminally bad fiscal policy, corporate greed, and our blind loathing of regulation.

Now I've gone WAAAY over my 100 word limit, but this issue gets me really mad!

Kat, you may be too young to remember redlining. And FHA went it was first created back in the 30s somehow ended up being a program that underwrote whites fleeing the cities for new homes in the suburbs. When this pattern became evident, there were lawsuits and new laws being on the books to make sure that first time home buyers and minorities were not discriminated against. Over time, more an more laws and programs were added to try to get people who were renters into owning their own homes, on the premise that owning a home was better than being a renter. Owning your own home gives you some more control over your life but it also gives you more expenses and more responsibility. Not everybody is ready for that. The low interest rates attracted people in. It doesn't mean that the loan sales people didn't push people but the products that were on offer were meant to get people into a house as if this were the only goal, regardless of people's situations, credit history etc. If you had less than great credit, they just offered you a higher rate, more points, in essence, a worse deal. It was still people's choice to take it. The alternative would have been to not offer them a loan at all and keep them out of a home. That's what's going to happen now if we put more restrictions on the credit market. We didn't get here due to one or two factors and we won't get out simply by restricting loans. We need people in these vacant houses.

rightwithu: I know what you are talking about with the teardowns. The city won't create a park when it tears down a house. It wants to sell that lot and put a tax paying property owner on it, whether it's a rental or a single family home. Given the drive for density, the city council would rather see a lot zoned for single family be turned into a duplex or even more units. I hope that with all the vacant houses they will think twice about this. We don't need more houses if all these houses are standing here empty. We also really don't need more density in North. We have plenty of rental properties as it is and a lot of them are for rent right now.

Your comments are so wrong it's ridiculous. First, you dance around racist comments by referring to "political correctness" and "these groups". Call this group "the blacks" and get it done with. Redlining, or not permitting black consumers to get mortages in "white" neighborhoods was institutionalized and practiced for many many decades. These facts are irrefutable. So complaining about national banks not giving a mortgage to a customer because he or she is black is hardly "whining". It's illegal, unethical, and wrong.

Second, a vast majority of subprime mortgages went to white consumers. Look up any government or real estate economic database to verify these facts.

Third, your comments that a group that whined about discrimination shouldn't whine about predatory lending is absurd. If you're starving, do you not have a complaint if the only food I give you is rancid? Of course you do.

Of course it's stupid to think that someone earning $30,000 a year can somehow magically own a $500,000 house. They can't. But when someone has wanted to own a house their entire life sits down with someone who is well-dressed, well-spoken, and part of a large corporation, you can't blame that person for believing the mortgage broker who abdicates responsiblity and convinces that person that for $900 a month they can own this house. I'd bet anything that I could pull out your last credit card statement or rental car policy and find some detail of which you know nothing about.

Get your facts straight before you spout off pseudo-racist babble. And don't give us links to articles written in early 2005 about illegal immigrants able to get houses. It's 2008.

Actually your logic is faulty. It is the legal responsibility of a property owner if a crime is committed on his or her property. So if a bank owns a house, allows it go into disrepair, and crimes are committed on that property, then the bank bears some of that responsiblity.

Your argument that nobody would want to live where "stray bullets" can kill is ridiculous. In that case nobody should live in Minnesota or Wisconsin during deer season. There are a lot more stray bullets during opening weekend than all year long in north Minneapolis.

But I'm sure you and your neighbors would welcome with open arms those families from north Minneapolis that would like to leave all their friends and families and support network and come live with you. What's your address by the way?

I didn't blame political correctness for the crisis. I didn't blame blacks or other minorities for the crisis maybe you are referring to one of the other commenters. The 2005 Malkin link was somebody else too. I did bring up redlining so I'll address that comment.

Redlining wasn't illegal before laws were passed against it. Redlining as a practice was used against blacks but it was also used against Jews and other immigrant groups before it was made illegal by changes in the banking laws. The idea was that neighborhoods ought to be "homogeneous" like we think of old neighborhoods in big cities. This is of course based partly on racist thinking but that was the original thinking. Redlining is old history in this current situation. The only reason I bring it up is that there are always unintended consequences when we pass laws trying to re-engineer people's behavior. I am only hoping that whatever happens this time, it doesn't conduce to keeping good homeowners out of THE MASSIVE GLUT of vacant houses we have here in North. If it keeps them vacant or turns us into more slumlord housing then that will be a bad outcome.

I don't think the end of redlining made it inevitable that banks would make bad loans. I think that a series of changes, including the end of redlining gave banks the incentives to push loans for low income people, whether they were black or white, to get mortgages. Some people did fine with them. But because a lot of people are defaulting we may be moving to a situation where it will be hard for these people to get mortgages. I think it's a bad thing when people are not allowed to make their own choices on the chance that they might make the wrong one. Are some people not able to make good choices because they lack education or information? Undoubtedly. But I don't think that the answer is to deny whole groups of people the opportunity on that basis.

It's nice to see Banker set the record straight on the ridiculous theory that "politcal correctness" is partly to blame for the subprime mess. Buzzland is dripping with a political bias in nearly every post and most of the audience it draws laps it up.