[link|http://marketplace.publicradio.org/shows/2007/04/17/PM200704174.html|Marketplace] report by Mhari Saito:

Welcome to our world, says Ron O'Leary, who works at the Cleveland Department of Building and Housing. He says the city has stopped bothering trying to get through to lending companies. The city just calls the local attorney representing the lender. And even that doesn't always work.

RON O'LEARY: The response that we get back is "We're several layers removed from the actual client." We try not to let them off the hook that easy, because they're the only ones we really know where they are and we'll just keep finding them.

Just try getting an owner to maintain a home if you can't find them. What happens next is these boarded properties become magnets for criminals who trash them and gut them for any metal they can sell. That devastates resale value.

Larry Litton Jr., a loan servicer in Dallas, says lenders are stuck. Even if a property had some resale value, there's virtually no market for it.

LARRY LITTON JR: There's some markets whenever you sell real estate, the only buyers may be investors. That perpetuates the problem. Because an investor buys a house, they put a tenant in the house, the house may not get fixed up. It becomes a cycle.

As the homes decay, owners listed on the deed are getting dragged into court for violating city codes.

But Judge Raymond Pianka says he's repeatedly calling in owners who lost their homes in foreclosure and are now long gone. That's because real owners don't want to be found. After foreclosing, lenders are taking months and even years to file deeds. That, Pianka says, lets them duck tax and maintenance bills.

RAYMOND PIANKA: We've seen banks and mortgage companies hold off on filing the deeds until they find a buyer. Then all of a sudden, all the deeds are filed in the same day and it's a detriment.

Meanwhile, Cleveland is floating a $6 million bond to tear down hundreds of dangerous, abandoned homes.

Councilman Tony Brancatelli says that's only a fraction of what's needed and it's time for lenders who made billions on Wall Street selling those subprime loans to step up to the plate.

BRANCATELLI: They need to come to the table and make us whole, and they need to help recover from the problems that they created.

At the end of 2006, absentee owners owed Cleveland $4 million for cutting grass and boarding up homes. Officials say banks owe most of that. Lenders say the city needs to do a better job of figuring out the real owner.

This collapse in the housing market has the potential to be a disaster for older cities - especially in the Midwest. I'm not sure what can be done at this point, but a start on the problem would be to make sure that new owners register their properties with the localities quickly.

Even if the banking system has protected itself from huge losses (something I'm not totally convinced of BTW), it seems clear that there are going to be major after-effects of the real estate bubble and sub-prime mortgage fiasco.

Cheers,
Scott.