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Tour of a Neighborhood Destroyed by Subprime Lending

Rosa O’Neil would like to know what happened to her neighbors. Over the past decade she’s watched as people she’s lived next to for decades, disappear one by one, until she lives nearly alone on her Irvington, New Jersey street.

Subprime lending was especially popular in low-income, minority neighborhoods during the boom. Bankers were encouraged to push subprime loans even to people they thought would default. In return they were paid commissions seven-times higher than for ordinary loans.

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“What the [1967] riots didn’t do to Irvington — subprimes did,” Don Baldyga says from behind the wheel of his silver Subaru wagon. Baldyga is a real estate developer with the non-profit Episcopal Community Development (ECD) in Newark, and says that as bad as things are here, they are going to get worse.

“The shadow demand is immense,” he says, referring to the 50,000 homes his organization believes are headed into foreclosure. “Most of these homes here,” he says, throwing his right hand across the Subaru, are owned by Deutsche Bank. Hundreds of these homes. It surprised us, but I guess it shouldn’t have.”

Baldyga says that the 36 foreclosed homes ECD recently purchased were owned by 19 separate banks, representing 19 individual subprime pools. “A lot of these people were in their homes for 25, 30, years with their mortgages totally paid off.” Baldyga explains.

In the boom years they’d get calls urging them to refinance. When the owner would say “No,” that they could never repay the hundreds-of-thousands being offered; lenders would explain how they would just refinance again the following year to pay it off. People bought it, and now they’re gone.

Read more: http://www.businessi…2#ixzz1gEctnCn5

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