There goes the Neigborhood (60 Minutes)

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There goes the Neigborhood (60 Minutes)

Pelley: You know there are lots of people all over the country. Many thousands of people who are mailing the keys to the bank and walking away. They can’t figure out how it makes sense to put more money into a mortgage that’s underwater.

Hubbard: Can’t speak for them. I can only speak for me. And my reputation that I have to uphold.

Pelley: Your signature means something.

Hubbard: It does. It does.

Norma Scott is the only one throwing in the towel. She stopped paying her mortgage when she got breast cancer and had to stop working for a while.

Norma Scott: I made the mortgage payments for as long as I could. And then the money just ran out.

Pelley: And then they sent you a letter last Christmas Eve.

Scott: Yes, and foreclosed on my property.

Pelley: It seems to me that you’re living day to day, waiting for a telephone call or a letter from the sheriff–

Scott: From the sheriff, uh huh.

The Cuyahoga County sheriff is doing 50 evictions a month. Chris Waple owned a restaurant, but when it went under, he couldn’t make his mortgage payments. And so Waple and his family were evicted from the house that he’d lived in for 23 years. He’d raised five children here.

That was more than three months ago that Chris Waple left this house, and it’s still vacant. There’s not even a “For Sale” sign in front of it because the realtors tell us if there are too many “For Sale” signs in one block, it makes everything harder to sell.

Just four doors down, Graham Jarvis learned that the hard way. His house has been on the market six months, but only six people have taken a look. Next door, Jennifer Wylie has seen the value of her home drop 50 percent. You can’t see it in this neighborhood, they’re keeping up appearances, but a quarter of the houses here have been emptied by foreclosure. And on this handsome block in well-to-do Cleveland Heights, at least four vacant homes are scheduled for demolition.

Former County Treasurer Jim Rokakis, says banks could stop the wrecking crews if they would only reduce the loan balances on underwater mortgages.

Rokakis: You’re gonna have to write down principle balances. Because if you don’t write down the principle to something that’s more realistic, it just guarantees that more people will walk away and more people will default.

Pelley: Look, you’re asking the banks, to write down the principle on these mortgages, to take losses in the millions, if not billions of dollars.

Rokakis: Oh, hundreds of billions.

Pelley: Why would they do that?

Rokakis: Aren’t you better off let’s say on a $150,000 mortgage preserving $75,000 in value, as opposed to letting that house go vacant, possibly seeing the house vandalized and dropping to a value well below that? I mean, they helped to cause this mess. And it’s not going to fix itself without their cooperation.

Cuyahoga County ripped down 1,000 homes this year. And they have 20,000 more to go. That’ll cost about $150 million dollars. And all that’s keeping other neighborhoods from the same fate are those 11 million underwater homeowners like Linda Bizzelle who stubbornly refuse to walk away.

Bizzelle: I want to keep my home. It, it you know, when you’ve worked all your life to get the American dream, you don’t want to just walk away. You don’t want to do that. You do whatever it takes to keep what you have.

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