Desert Underwater: Foreclosure Bomb Hits Nevada - 8 News NOW

Desert Underwater: Foreclosure Bomb Hits Nevada

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Homeowner Laura McSwain Homeowner Laura McSwain
Attorney Tisha Black Attorney Tisha Black
Attorney Matt Callister Attorney Matt Callister
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LAS VEGAS -- When the housing bubble burst, no community in America was harder hit than the Las Vegas valley. The foreclosure crisis became an unemployment crisis and the ripple effects are still expanding outward. How did it get this bad? And how have local residents tried to dig themselves out?

We've become  almost immune to the constant drumbeat of bad economic news: foreclosures and evictions, empty homes, lost jobs, families ruined. But there is much more to come. Sorting it all out is daunting, as thousands of homeowners have discovered on their own. Nevada finds itself in a deep dark hole that can not be dug out of anytime soon. When an entire community is engulfed by a tsunami of red ink, lives are broken and mistakes are inevitable.

Ask Nilly Mauck, who returned home one day and found that everything she owned had been seized and trashed. The company hired to evict her foreclosed on the wrong address. It was the same for Jerry Thitchener, whose every possession was cleaned out and thrown away in a foreclosure meant for someone else. When a bank took away the Cordinas' house, the family moved into a tent in what used to be their backyard. The shame of losing their home led Mr. and Mrs. Jeff Lingle out to the desert, where they took their own lives. Police found their bodies and a gut-wrenching note.

Every day in Las Vegas, dreams are crushed, lives extinguished.

"We were counting the effect this economy has on people and it is literally killing them," said attorney Tisha Black. "We counted 29 suicides that we know of. It's devastating, in a psychological sense, when these communities are disrupted because people have to move their children from a school, or friends have to move because they can't find jobs, or people are actually dying because of the loss of value or loss of their estate."

Until recently, Tisha Black's law practice focused on commercial development. These days, she spends most of her time helping people facing foreclosure.

For more than 20 straight years, Nevada grew faster than any other state. Our boom was bigger, and so was the inevitable bust. The terrible consequences are all traceable to the housing collapse.

"We are ground zero. There is virtually no one in this state that has not been affected by the foreclosure problem," Black said.

It is the economic equivalent of an atomic explosion with the destruction spreading out in every direction and creating havoc. Since 2008, more than 75,000 homes in Clark County have been foreclosed. Twenty thousand local families were evicted from their homes in a single year. Another 20,000 had to escape their mortgages through short sales. Nevada tops the nation in almost every dubious economic category.

In September, new notices of default were sent to local homeowners at five times the national average. Hardest-hit North Las Vegas saw one in every 53 houses go under. Henderson and Las Vegas were not far behind. Those who kept their homes lost as well. Property values have plummeted. As of June, more than 63 percent of homes were underwater, meaning nearly 270,000 local homeowners owe more than their homes are worth. They are upside down by a collective $14 billion dollars.

Chart: Las Vegas Mortgage Holders are $14 Billion Underwater

Evicted owners, angry about shabby treatment by the banks, take out their frustrations by stealing fixtures and demolishing what's left. Up to 6 percent of local houses and 11 percent of apartments are vacant. The empty homes are an invitation to criminals. Banks have made it worse by failing to maintain the foreclosed homes, allowing entire neighborhoods to become islands of neglect.

"You drove down our street and it was weeds and dead grass. Ed and I would take the lawnmower and pull weeds so we didn't feel like we were coming home to a ghetto," said homeowner Laura McSwain.

She didn't exactly live in "the hood." Southern Highlands is one of the valley's most prestigious addresses. The McSwain home was purchased for well more than $1 million but is worth about a quarter of that now. Many of Laura's well-to-do neighbors had no choice but to simply walk away. She estimates 60 percent of the homeowners on her street have walked away.

"Anybody who lives here has been impacted. I don't care if you've lost your house or not, we've all been devastated," McSwain said.

Homeowners have plenty of company. The national economic quagmire hit Las Vegas tourism hard. McCarran International Airport had nearly 8 million fewer visitors in 2010 than three years earlier. Overall gaming revenue fell $2 billion a year. The largest employer, MGM MIRAGE, lost $4 billion just in the value of its property. Thousands of resort employees lost their jobs and the construction industry imploded, as more than 60,000 construction jobs vanished, probably forever.

Las Vegas led the nation in unemployment, topping out at 15 percent before slightly receding in recent months. In just one year, 25,000 personal bankruptcies were filed. Business bankruptcies increased 170 percent after 2008. The number of homeless on the streets increased 40 percent. Nevadans on Medicaid jumped 66 percent since 2007. The demand for public assistance tripled. The number asking for food assistance exploded by 169 percent since 2007.

Chart: Clark County Bankruptcies

The greater demand for government help came as tax revenues dropped and were not replaced. There were fewer public employees to help because thousands of government jobs had to be eliminated because of local, state and federal budget cuts.

Making everything worse was the response from the banking industry -- banksters, as they have come to be called.

"Bernie Madoff is small change compared to what is happening on an institutional scale here," said attorney Matt Callister.

He has filed lawsuits on behalf of nearly 3,000 local homeowners. He says there are laws to help people hang onto their homes but the laws were written poorly -- maybe on purpose -- and banks won't participate unless forced to do so.

This week, the I-Team will look at the tactics used by banks in dealing with their customers, including an epidemic of so-called "robo signing." Scariest of all is the possibility that many unsuspecting homeowners do not, in fact, own their homes. I-Team George Knapp was surprised to learn that he is one of those homeowners.

 

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