In its pilot period, Minneapolis Advantage gave out approximately 50 grants to low-income, first-time home buyers in foreclosure-impacted neighborhoods in the North, Northeast and South Minneapolis neighborhoods. Buyers receive up to $10,000 to help with down payment and closing costs so long as they buy a home on the same block as a foreclosed or vacant home.

In its pilot period, 62 percent of the properties purchased were foreclosures and 9 percent were boarded up and vacant. The program encouraged more owner-occupied homes, as 62 percent that were rental units became homestead properties. The majority of the new home owners bought in North Minneapolis, had incomes under the median and bought homes priced under $150,000.

Seventy-eight percent where first-time home buyers.

The FHLB of Des Moines grant will triple the amount of grant awards for the program.

“The key to rebuilding neighborhoods overwhelmed by foreclosures is to get solid, responsible homeowners into these neighborhoods,” Mayor R.T. Rybak said in a statement Wednesday. “The success of the Minneapolis Advantage program has shown us that there are great homes to be had and that people are ready to move into these neighborhoods. Our job is to help make that happen and this funding just made our job a whole lot easier.”

On Minneapolis’ north side, where I live, Election Day started out with long lines of citizens waiting to vote. At the Urban League and a block away at Northpoint Health & Wellness Center, voters had to wait as long as an hour and a half. Further north in Minnesota Independent editor Steve Perry’s neighborhhood, lines were nearly as long. We visited the lines and asked voters how their experience went and what issues brought them to the polls. Here’s what they had to say:

A discarded newspaper outside a North Minneapolis polling place. Photo: Paul Schmelzer

Outside North Minneapolis’ River of Life Church, an official polling place, a discarded copy of The Final Call newspaper this morning suggests one possible reason record numbers of voters, including many first-timers, are expected to hit the polls today. See MnIndy’s Election Day Flickr pool here.

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It’s become a broken record of late: Home-price declines breaking records. With the economy on the skids and the subprime crisis still unfolding, home values are getting devoured first. This morning the S&P/Case-Shiller home-price index was released, revealing that the trend doesn’t show any signs of slowing down. The 20-city index showed year-to-year August price declines of 16.6 percent. Minneapolis saw a drop of 13.3 percent over the year period, with a 1 percent decline from July to August.

Recent reports indicate that home sales are up, a possible sign of a turnaround, some analysts say. But trusting in that marker is like Greenspan relying on capitalism or ghosts relying on astrology–it’s meaningless and totally futile. Home sales are up as a result of the sharp increase in foreclosures and short sales, a bad sign for homeowners and an already shaky economy. In fact, according to the most recent report from the Minneapolis Area Association of Realtors, the inventory of foreclosures and short sales–property sold for below its current loan value– has increased more than 64 percent of the past year. Of the current homes for sale in the Twin Cities, nearly 30 percent are foreclosures or short sales.

The hardest hit neighborhood in Minneapolis is on the Northside, where lender-mediated sales (short sales and foreclosures) account for 69 percent of the inventory of homes for sale in October. Powderhorn is a close second with nearly 52 percent. And the suburbs aren’t immune to the growing problem. Foreclosures and short sales make up more than 63 percent of all the October homes sales in Brooklyn Center.

In St. Paul, the Central neighborhood’s current home sales are more than 63 percent lender-mediated, while Phalen’s foreclosures and short sales have risen to 60 percent this month.

This North Minneapolis home was destroyed by foreclosure, arson and later the city's wrecking ball

All throughout North Minneapolis, 100-year-old trees are turning deep shades of gold and crimson. On some streets, the tall oaks look like lone survivors of a nuclear disaster, untouched by the blight over which their canopies cast long shadows. In fact, you don’t have to spend much time in North Minneapolis before a darkening picture becomes clear. Something happened here. Something serious and destructive and almost barbaric.

Entire blocks, like those near the corner of Sixth and 13th, have been destroyed. Gray boards cover windows and trash litters yards and alleyways of abandoned streets. There are nearly 900 vacant homes in North Minneapolis. And more than two-thirds of those are now condemned.

What happened here is what many housing experts call reverse redlining — predatory lenders targeting low-income and black and Latino neighborhoods with high-cost and imprudent loans. Conservative columnists, pundits, bankers and politicians like Minnesota’s own Michele Bachmann have taken to blaming the subprime fallout and subsequent credit crisis on the Community Reinvestment Act, a Carter-era program that was designed to require banks to make loans in areas from which they also took deposits. And housing and civil rights experts like Myron Orfield, a law professor at the University of Minnesota and the executive director of the Institute on Race and Poverty, and Geoff Smith of the Woodstock Institute, a policy and advocacy organization that specializes in housing research, say they couldn’t be more misguided.

Created more than 30 years ago, the CRA essentially worked like this: In turn for taking money from low-income communities, banks would have their lending practices examined by federal regulators to ensure they’re making loans for mortgages, small businesses and community development in those same neighborhoods. In other words, they’d be examined to ensure they weren’t discriminating against low-income neighborhoods that supplied them with monies to make loans to other customers.

But what actually happened in the last few years, Orfield says, is much different. “One of the purposes of the CRA was to ensure that prime credit would be extended into poor neighborhoods,” Orfield says. “And it never really has been that way. It’s been 30 years of enforcement, and it hasn’t really gotten better. Neighborhoods have become more racially segregated, particularly in the Twin Cities. The CRA has become perverted. It’s often become a way to have subprime and predatory lending and to reinvest in projects that deepened poverty. This is what CRA has come to mean.”

For one thing, the CRA never required banks and lenders to create risky loan packages and market them to consumers who would be unable to afford them after the terms changed. For another, the banks never had a specific quota to meet under CRA, but instead were simply required to show they reinvested back in the community.

Geoff Smith agrees with Orfield’s assessment, and says blaming the CRA is woefully misplaced. “The CRA wasn’t the problem,” he says. “The mortgage crisis went well beyond the scope of the CRA. What’s more, the vast majority of lenders were not covered by the CRA. In fact, it was a loophole in the CRA that subprime lenders were not covered under CRA by regulation.”

Targeting Twin Cities neighborhoods

Orfield is serving on a national bipartisan commission, co-chaired by two former Department of Housing and Urban Development Secretaries, Jack Kemp and Henry Cisneros, to study housing discrimination in America. The group has been taking testimony from homeowners in cities like Atlanta, Chicago and Boston. While the Twin Cities are not part of the investigation, Orfield says that Minneapolis and surrounding suburbs are taking a serious hit from reverse redlining and continued segregation.

“There is a lot of segregation in this metropolitan area, and it’s deepening,” Orfield says. “There’s a disproportionate share of these loans in black and Latino neighborhoods. The predatory action has certainly not only destroyed equity, it’s destroyed families and deepened racial segregation. And that’s not what the CRA was meant to do.”

Orfield says that neighborhoods hardest hit are North Minneapolis, South Minneapolis, Brooklyn Center, Brooklyn Park, Bloomington and Richfield. These were areas that had a higher concentration of loans created by mortgage shops like Countrywide, Ameriquest and other one-off subprime mortgage providers — lenders who were not under CRA regulation. In other words, they were lenders only looking to make a quick buck whose lending practices weren’t evaluated by regulators.

In an effort to compete with the growing number of mortgage shops, banks like Minneapolis-based U.S. Bancorp began making subprime loans. But these larger banks, which are FDIC insured and under CRA and larger federal regulations, often had thrifts, or subprime mortgage stores, that weren’t depositors and therefore not under CRA and federal rules. The nefarious loans, which could then be easily bundled and sold while brokers raked in quick cash from the close of the deal, were then purchased by companies like Freddie Mac, which began buying these subprime loans on the secondary market in 1998. That deal made it easier for banks and mortgage lenders to sell the loans and quickly remove them from their books.

Smith says don’t get it wrong, the CRA is not without flaws. For one thing, it didn’t regulate these mortgage shops that were preying on people in low-income neighborhoods. In fact, Smith says, it’s a flaw in the CRA that it doesn’t prevent these kinds of risky loans from being made. But it certainly wasn’t what drove these loans or the crisis. “The problem is pretty clear,” he says. “It was little regulation, and little accountability.” What’s more, it was institutionalized racism.

What’s next for the Twin Cities?

Orfield says that as the subprime crisis continues to unfold and minorities get hit the worst, Minneapolis is fast becoming more racially segregated. “We are going backwards,” he says. “We are actually so far behind where we need to be. This is a problem for the entire city. It affects education, crime rates, prison populations. It affects everything. And we’re actually seeing the city use this as a means to put up low-income housing in low-income areas. But segregating housing is not the answer.”

Orfield says he hopes cities will use this as an opportunity to reexamine both state and federal housing programs, from HUD to city-funding housing units. Neighborhoods, he says, need to be diverse both racially and economically to thrive.

The city of Minneapolis recently received a $5.6 million federal grant to buy up houses in neighborhoods like North Minneapolis and to reinvest in neighborhoods decimated by subprime lending. But Orfield says it’s going to take a lot more than a few million to take care of the problem. For one thing, there are nearly 900 abandoned properties. For another, the problem is widespread and systemic and requires real leadership to enact change and create more mixed-use housing.

Orfield says Minneapolis Mayor R.T. Rybak and city planners need to start considering creative and forward-thinking solutions, not short-term Band-Aids. If Minneapolis wants to survive the crisis, he says, it needs to start applying the Federal Fair Housing Act in its decisions to reinvest in communities. “If [the] Federal Fair Housing Act were really applied, you’d have more of these family units built in suburban areas, too. But we don’t see that,” he says. “And instead it’s getting worse.”

You don’t have to go far into North Minneapolis to see it: Homes made dark by boards covering windows and doors. Most of the boarded homes here are festooned with gray plywood. Those boards — the ones the color of street grime or dryer lint — were hammered into place by city workers. Gray boards are a telltale sign that the city has had to intervene.

According to Tom Deegan, manager of Minneapolis’ problem properties unit, in 2004 there were about 250 properties on the city’s vacant and/or condemned properties list. Today, there are close to 900 vacant homes in Minneapolis. Eighty percent of those have gone vacant in the last 18 months. Two-thirds of the vacant properties are now condemned. All of the spikes can be directly attributed to the growing foreclosure crisis.

The North Side — the area hardest hit by the foreclosure epidemic — is home to around 560 of those vacant properties. In the city’s Jordan neighborhood, TVs, refrigerators, and air conditioners litter the alleyways. These are the things left behind. They get ripped open, stripped of copper, and the remaining guts now stream streets and yards.

Dustin Maddy, an administrative analyst for the city’s problem properties unit, drives through these alleys every day. His job is to make sure homes are still boarded and not open to trespassing. “This is what happens,” he says, noting piles of debris and electronic parts littering one North Side alleyway. “These homes become dumping grounds. And the city has to come and clean it up.”

Continued: Click “Read more”Lenders have gone missing

Tom Deegan served as the city’s fire Marshall for a number of years before taking over as the city’s problem properties manager in 2004. Along with Deegan, there are only nine employees working on the city’s 900-plus-and-growing vacant properties, from inspections to maintenance to court orders to demolitions orders.

Since 2005, home demolitions by the city have increased by 97 percent. In the 600 block of North Third Avenue in the Jordan neighborhood, more than five homes have been demolished this year alone. The majority of them suffered fire damage by arsonists trying to collect insurance before the prices dropped further.

On a visit to that blighted block one day in early April, the city is razing another home, this time due to lack of maintenance. A Bobcat tears through the skeleton of the basement. Water is constantly sprayed over the remains to keep dust and asbestos from blanketing the neighborhood.

As a result of foreclosures, lenders now own a majority of the 900-plus vacant homes in the city. But Deegan says they’ve totally disappeared. And as a result, they’re thrusting the financial burden — from maintenance to boarding to policing — onto on the city.  Boarding the homes alone costs taxpayers $350,000-$500,000 a year.

“What we would like to see is these banks come in and at the very least, certainly to offset the cost of the local taxpayers, respond to the problems these homes are causing in the communities,” Deegan says. “And that is not happening.”

There is no local accountability, he notes. Banks, even those with headquarters in Minnesota, have washed their hands of it, passing it on to Wall Street and beyond.

“Where is the local representative for these lenders?” Deegan says. “I don’t care if they’re in Tangiers. You’ve got a billion dollars worth of assets in a local municipality. And you have this crisis. This is an opportunity to come forward and say, `What can we do?’”

Homes become vestibules of crime

Some of the boarded homes have For Sale signs erected in their front yards. But the chances of them selling are slim. Inside, they are often gutted. They look like carcasses in a ghost town. One particular boarded home for sale in Jordan sits on a block where only two others don’t have the telltale gray boards decorating their outsides.

Dustin Maddy notices one of the boards on the home has been removed. Someone has busted a window and entered to steal copper. Inside, there’s blood everywhere  — likely because the shattered glass split open someone’s knuckles.
The temperature is about 20 degrees cooler than it is outside. Warm sunlight doesn’t penetrate the plywood over the windows. A stripped mattress abuts a wall. Trash spreads across the floors. Standing alone and empty, the homes become vestibules of crime.

This is a single-family home. But many on the condemned and vacant list are multi-family units. In some cases, these were run by slumlords who took renters’ money but never paid utilities. When they become foreclosed and boarded, as many as four and five families lose a home each time.

“These are the people who are truly in the trenches,” Deegan says. “We’re on a slippery slope trying to give a sense of balance back to these people who have stayed behind. The people we talked about today? They’re not invested in these communities. And that’s the tragedy in this.”

In a heated discussion today, Samuels said he doesn’t regret from making those comments, but apologized for using “extreme language,

With three murders committed during the first 11 days of this year, Minneapolis is on pace to quadruple last year’s 60 homicides. The brunt of the victims