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Economy and Business

When is $7 billion not enough? When you're talking housing crisis
The Citibank settlement is likely to help Northeast Ohio, but how much is a question

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M.L. Schultze
Cities like Youngstown, Akron, Canton and Cleveland have seen whole neigbhorhoods wiped out.
Courtesy of M.L. Schultze
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In The Region:

Citigroup was among the most active players in the subprime mortgage market in Northeast Ohio. So the $7 billion national settlement announced today is bound to have an impact here. But as WKSU’s M.L. Schultze reports, some of those involved in the cleanup of the mortgage mess in the region say there may not be as much relief as people had hoped.

LISTEN: Big settlements don't always mean big money

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Details of the settlement are still emerging, but terms include $2.5 billion for consumer relief – such as reducing principals owed on loans. It also includes a $4 billion civil settlement with the feds and another half-a-billion dollars to make things right with the FDIC.

Frank Ford is with the Thriving Communities Institute, which has been trying to rejuvenate neighborhoods in Northeast Ohio. Many need demolitions and rehabilitations of vacant houses that cost from $10,000 up --  money most communities don’t have.

“In the absence of that resource, when settlements like this one come along,  … it’s not just because they represent a source of money but it’s because they represent a source of money  coming from the very institutions caused f the damage that we’re living with.”

Besides demolition and renovation, Ford’s group has put together a proposal for similar settlement money from Chase to be spent on foreclosure prevention and vacant land re-use. But he says the settlements often look bigger on paper than in actual payments because they include the banks writing off some of their loans.

A quick look at the Ohio Plan developed after the Chase bank settlement:
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“There’s really four categories. Of course there’s money for demolition and money for renovation. Then there’s subsidy for renovation. Then there’s money for foreclosure prevention, to keep homes occupied. That helps keep the blight down. And the final category is if homes are demolished, there’s money for how you can convert some of the he land to community gardens, food production, orchards. There’s a whole range of community things that could be done.” 

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