Detroit didn’t stumble into the the foreclosure mess by itself, so it shouldn’t be left to recovery all on its own. At least that is what one article in The Detroit News argued.
The article blamed the practice of subprime lending, driven in part by federal policies and in part by the irresponsibility of lenders, as having the greatest negative impact on the nicest neighborhoods in Detroit, contributing to the ongoing decline in middle class residents.
Those companies should feel an obligation to help clean-up the mess. The News' series found that many were exploitive in their practices, focused entirely on issuing loans and unconcerned with whether the borrowers could repay the debt. The News also found evidence of deceptive or misleading claims made to homebuyers who lacked the knowledge to protect themselves.
And the government has its own set of initiatives that it needs to take.
Many homeowners cannot keep up with high interest mortgages and tax bills that are completely out of line with the true value of the home. Mayor Mike Duggan is working to bring assessments to market reality, but it is a slow process.
One of the main solutions out there created by the Community Reinvestment Act might be more a problem, the article noted. This could be an issue since those loans by nature have a higher failure rate.
As a result, the article said that the CRA should be revisited to assure it is not contributing to the devastation of the communities it was designed to assist.
Detroit never really participated in the hoopla of the financial crisis. “But the lack of frenzy in good times did not protect Detroit from the bad times, with the subsequent national collapse in home values hitting Detroit as hard as any market, if not harder. And since then, while local housing markets around the country have gradually dug themselves out, Detroit has been stuck,” said Aaron Terrazas, senior economist at Zillow.
Quicken Loans is contributing a lot of to revitalization of the city, but it still has a long ways to go compared to the rest of the nation.