By Providence (RI) Mayor David N. Cicilline
March 10, 2008

The American Dream is threatened, and the ability to live in one’s own home is no longer secure. When that opportunity of home-ownership is jeopardized, the impact to a community and to a city neighborhood is serious. The consequences to individual families are obvious and devastating; the harm to neighborhoods and cities can be long-term and seriously undermine progress.

In recent months, the compounding effect of homes falling to foreclosure is sending sizable shockwaves throughout our national and global economy. All across America, neighborhoods are marked with boarded-up houses. Single and multi-family homes are shuttered, neglected and vandalized. The physical consequences to the neighborhood are obvious, but the social and economic consequences are just as severe.

Recent reports by Realtytrac, a national foreclosure tracking company, show that 1.3 million properties were foreclosed on last year — in a crisis fueled by rampant sub-prime lending and bad debt, and what investigators consider possible fraud and insider trading on loans made to risky borrowers and investments on insecure loans. A local home becomes the target for vandalism and blight, but its owner could be Deutche Bank and as far away as Frankfurt, Germany.

Despite the Federal Reserve — or Fed’s — repeated attempts to right the market with cuts in the Federal Discount Rate (which is the signal to larger banks to drop their prime lending rates), the problem is becoming worse. According to a recent report by our own US Conference of Mayors, foreclosures are expected to increase by 1.4 million nationwide, in 2008, leaving a continued trail of blighted, abandoned property in its wake.

Mayors are, again, put squarely in the eye of a national storm — determining how best to cope with this foreclosure epidemic. While there are things we cannot control, such as the lending practices of mortgage companies and the financial investment groups that back them, there are some things we can do to staunch the loss and give hope to homeowners and businesses alike. In Providence, we have begun that fight.

I have introduced an ordinance to our city council to create a new “Abandoned Property Penalty,” with an annual levy of $10 for every $100 of assessed value of the property. It will create a buyer’s market in a distressed situation, discourage speculative investment, and create a disincentive for absentee investment buyers to hold onto vacant properties for extended periods of time. A portion of these funds secured through this levy will go directly to the city’s Housing Trust, which we established to create more affordable housing.

We have created a new loan fund of one million dollars from our Housing Trust to provide no-interest loans to working families to defray the cost of repairing homes already foreclosed upon and in need of repair due to neglect and/or vandalism. Repairing the damage makes it much easier for prospective buyers to convince bank officers of a reasonable bargain and secure a mortgage loan.

I have directed our city’s law department to review two, distinct avenues for litigation - one, a public nuisance suit targeting banks that hold foreclosed properties for extended periods of time, devaluing surrounding property and creating neighborhood nuisances as the city of Cleveland has done. And I have also asked the law department to review civil litigations seeking restitution for the lending practice referred to as, “reverse red-lining,” in which minority groups are specifically targeted for predatory loans as Baltimore has done.

The hard work we have invested these past five years, to make our twenty-five diverse neighborhoods more vibrant than in decades past, has been threatened but we will not give in so easily. With 750 homes in foreclosure, we want to reverse the trends, restore and stabilize our neighborhoods and accelerate the process of putting Providence homes back into the hands of Providence residents. There are things we can do as leaders to stem this crisis, and together, we can make the American Dream a reality once again.