WASHINGTON, D.C. – A group of Ohio cities and others hoping to stop foreclosure-related housing blight in the state have asked J.P. Morgan Chase for $200 million from a recent foreclosure-fraud settlement, hoping to use the money for demolition, preservation and foreclosure prevention.
Their “Ohio Plan” would help continue the ongoing work to remove thousands of dilapidated homes in Cleveland and elsewhere. It also would provide money for foreclosure-prevention counseling, renovation of blighted houses and reuse of vacant land where homes once stood.
But there is no guarantee the Ohio group, which includes the cities of Cleveland, Lorain and Dayton, and the Port of Greater Cincinnati Development Authority, will get the money.
Based on the J.P. Morgan Chase settlement, which came to $13 billion altogether, the Ohio request may be beyond the scope of what the settling parties envisioned. And although the bank and its foundation do give charitable donations, those total about $200 million a year – the amount the Ohio coalition is seeking.
J.P. Morgan Chase declined to comment.
The settlement resulted from a case in which the investment bank and two subsidiaries it had acquired, Bear Stearns and Washington Mutual, were accused of duping investors, including public pension funds. The securities’ underlying residential mortgages were “toxic,” or at risk of failure, and the banks did not adequately disclose that to investors, according to federal authorities. The settlement was announced in November by the Justice Department and several states, with California playing a lead role. Ohio was not a party in the case.
Officials from the Thriving Communities Institute, a Cleveland nonprofit at the forefront of efforts to remove eyesore properties in Northeast Ohio, learned of the settlement and saw that it was supposed to include money to deal with distressed homes. They said they also saw Detroit mentioned by federal officials in news coverage as a place where some of the proceeds might go to fight blight.
“They should have mentioned Cleveland and Dayton and Youngstown, cities that are disproportionately hurt,” said Jim Rokakis, director of the Thriving Communities Institute and vice president of its land conservancy program.
Figuring that Ohio faced problems long before many other states did, and that groups such as the Thriving Communities Institute had deep experience in trying to deal with the problem, Rokakis and others met with mayors and put together the $200 million proposal.
Ohio needs the funds more than many other parts of the country, said Frank Ford, senior policy advisor at the Thriving Communities Institute. And with expertise already in place, he said, Ohio could put the funds to use quickly.
“We don’t have to spend any significant time ramping up our capacity to do this,” Ford said.
The coalition asked Gov. John Kasich to get their Ohio Plan to Jamie Dimon, CEO of J.P. Morgan Chase, because Kasich used to work for Lehman Brothers and knows Dimon from the New York finance universe. The coalition also asked Steven Dettelbach, the U.S. attorney for the Northern District of Ohio, to send the plan to ranking Justice Department officials.
Mike Tobin, spokesman for Dettelbach, said the Cleveland-based federal prosecutor will review the plan and forward it within the Justice Department.
“Ohio has been hit hard by the foreclosure crisis, but an incredible coalition of community leaders has risen from the wreckage to help repair the damage to our community,” Detelbach said in a statement. “This group’s plan, which has been forwarded to me and to other government officials, is yet another demonstration of such leaders organizing and mobilizing to help their neighbors.”
Rob Nichols, spokesman for Kasich, said, “Our office was handed information about the plan late last week and our policy team is taking a look at it.”
Yet no formal process exists for applying for this money.
Asked if the proposal was a shot in the dark, Rokakis said, “My feeling is there’s no harm in asking, and maybe we get something and maybe we don’t… I wouldn’t call it a shot in the dark. First of all, there’s been silence about where this will be spent, and we want to be included.”
Of the $13 billion settlement, $9 billion is earmarked for specific uses and recipients, including $2 billion in federal civil penalties, $4 billion for Fannie Mae and Freddie Mac, which underwrite mortgages, and hundreds of millions combined for California, Delaware, Illinois, Massachusetts and New York.
The remaining $4 billion is “in the form of relief to aid consumers harmed by the unlawful conduct of JPMorgan, Bear Stearns and Washington Mutual,” according to the Justice Department’s Nov. 19 announcement. “That relief will take various forms, including principal forgiveness, loan modification, targeted originations and efforts to reduce blight.”
The Ohio Plan calls for spending $144 million for demolishing dilapidated structures; $16 million for programs to prevent foreclosure and abandonment, including counseling and intervention; $35 million for renovation of blighted homes that can be saved, and $5 million for repurposing land that is vacant due to demolition.
Ohio communities, nonprofits and the state and local governments have razed thousands of eyesores already, using money from a number of sources. That includes a $75 million fund set up by Ohio Attorney General Mike DeWine after a different mortgage case settlement. But the Thriving Communities Institute, recognized as a leader in the issue nationally, says there are tens of thousands more decrepit properties remaining, and others that are at risk of loss through foreclosure and abandonment.
It would cost at least $750 million to raze them all, the institute says.
Read it from the source.