Study Shows Tornado Did Not Affect Area Foreclosures
On October 20, The Tuscaloosa News published an article titled Tornado Did Not Affect Area Foreclosures, Study Shows.
Tornado did not affect area foreclosures, study shows
University of Alabama researchers expected to see an increase in foreclosures after the April 27, 2011, tornado devastated about 12 percent of Tuscaloosa. But when they looked at the foreclosure numbers in the tornado zone, they were surprised.
“There actually was a slight decrease in foreclosures,” said sociologist Bronwen Lichtenstein, an associate professor in UA’s criminal justice department.
Lichtenstein and Joseph Weber, an associate professor in UA’s geography department, have been studying foreclosures in the Tuscaloosa area for the last several years.
They recently had published their study looking at home foreclosures in the Tuscaloosa area during the economic downturn. That report in the academic journal Professional Geographer is titled “Old Ways, New Impacts: Race, Residential Patterns, and the Home Foreclosure Crisis in the American South.” It used Tuscaloosa to look at how the nation’s foreclosure crisis impacted a smaller city in the South.
It found the foreclosure crisis here affected people more likely to be living in poorer neighborhoods with a larger minority population, Lichtenstein said.
Following that study, Lichtenstein and Weber decided to look further in the foreclosure situation here by focusing on the tornado zone created by the April 27, 2011, tornado. They hope to eventually see that study published, too, she said.
Lichtenstein said poorer neighborhoods like Alberta and Holt had sustained some of the worst damage during the tornado. As such, she said she and Weber hypothesized that there would be an increase in foreclosures as homeowners with destroyed or heavily damaged homes walked away from the property, resulting in more foreclosures.
Weber said they looked at foreclosures in the tornado zone that occurred for two years before the tornado and for two years after it. The data showed little change in the number of foreclosures before and after the tornado. Lichtenstein said the slight decrease in foreclosures was statistically insignificant and might have reflected other factors, including an improving economy.
Lichtensteing said when the post-tornado data disproved their hypothesis, she wanted to find out why. That resulted in interviewing victims, government officials and lenders.
She learned that wealthy people whose homes were damaged or destroyed built back quickly, using insurance settlements and savings.
Most middle-class storm victims generally had adequate insurance and were able to recover, she said.
But in places like Alberta, rebuilding remained slow.
“What happened there is about 80 percent of the property is rental,” Lichtenstein said.
Those left homeless by the tornado often did not own the property, and the landlords who did were in no rush to rebuild, she said.
“If they (landlords) were insured, they got the (insurance settlement) money and did not rebuild,” Lichtenstein said.
“They are waiting for the (city’s) renewal plans, buyouts and other developments” — all that could transform the damaged neighborhoods into a more upscale area that could increase the vacant properties’ value. “They are waiting for the right moment,” she said.
Before the tornado, Alberta had a lot of Section 8 housing — properties rented to low-income people who received federal assistance to pay the rent. Those properties were older and often were more blighted, she said. The property owner now is seeing the opportunity to build something a little better, she said.
In turn, the poorer people who lived there before the tornado have had to move farther out,
“Just as the downtown is becoming more gentrified, the same will be happening in Alberta,” she said.
As for the overall Tuscaloosa-area foreclosure situation before and after the tornado, Lichtenstein said her and Weber’s studies show it affected lower-income homeowners the most. Anecdotal accounts indicated many of those homeowners got into financial trouble when they lost their jobs or had major medical expenses, she said.
But she said predatory lending also played a major role. Over the past two decades, people who might have been unable to buy a home in the past because of insufficient money for a down payments and poor credit ratings were able to get adjustable mortgages or home loans with higher interest rates.
Many of those people did not understand the consequences of such mortgages, she said, and were unable to afford them when rates adjusted upward or their income fell.
“If someone is so poor, how ethical is it to give them a loan that they cannot afford?” she asked.
Banks that made sub-prime loans usually sold the mortgages and did not incur the losses that occurred and contributed to the Great Recession.
Lichtenstein said she sees a need to better educate people so they fully understand the consequences of different mortgage loans, And in some cases, it might be necessary to deny a home loan if it is likely a buyer will end up in foreclosure.
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