Fixing The Foreclosure Crisis
Although residential mortgage foreclosures have wreaked havoc on many communities in metro Detroit and Michigan, efforts to stem the damage and boost property values are under way. But do the relief programs go far enough?
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The first decade of the new millennium will go down as one of the most turbulent in the history of the housing market, both in Michigan and across the nation.
The subprime mortgage crisis, lax federal oversight, and a spike in energy prices, coupled with high unemployment — the “perfect storm” of the 2008 financial meltdown — created an epidemic of foreclosures that have devastated families, neighborhoods, businesses, and property values, and have sharply reduced the tax revenue needed to support public services and schools.
Although a turnaround won’t be immediate, there are many organizations — assisted by state and federal efforts — working to reverse the trend and put communities across the region and throughout Michigan back on solid footing.
From 2006 through 2010, Michigan racked up nearly 275,000 so-called REO (Real Estate Owned) residential properties — dwellings that revert back to a lender, government agency, or government loan insurer following an unsuccessful sale at a foreclosure auction. Of that amount, nearly 162,000 of the properties were in Wayne, Oakland, and Macomb counties. Michigan ranks seventh nationally for REOs, according to RealtyTrac.
Meanwhile, default notices and foreclosure actions were filed on tens of thousands of other properties. Because so many homes were abandoned, sold for far below market value, or were converted into rental properties, home values have dropped 32 percent in the region during the past five years, according to the Southeast Michigan Council of Governments (SEMCOG).
In addition, thousands of borrowers who purchased homes at the height of the housing bubble, or refinanced their mortgage to buy a boat or a cottage up north, are “underwater” and at a higher risk of foreclosure, given that their loan balances are greater than current market values. In June, SEMCOG reported that 36 percent of mortgage borrowers in Michigan are underwater, the fourth highest rate in the nation.
No ZIP code has been immune.