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Amid Detroit's resurgence, foreclosure crisis still threatens homeowners

New businesses are breathing life back into Detroit - but tens of thousands of homeowners are still struggling

The new owner and the former owner faced off in the hallway of the brick house, which sits on a pleasant, tree-lined street. Howard Franklin and his daughter, Catherine, wanted to move in, but the people who had lost the home in a tax foreclosure had not moved out.

Voices got loud. Guns were drawn, and bullets ripped through the dark house. When it was over, the 72-year-old Franklin lay dead inside the front door. His 37-year-old daughter was sprawled on the porch, also dead.

Police quickly arrested Alonzo Long Jr., a relative of the home's previous owners, but anyone who thought this was a simple homicide case hasn't spent time in Detroit, where foreclosures have turned the killings into a symbol of the economic ills plaguing Detroit despite its emergence from bankruptcy in December.

"We do not have a shortage of housing in Detroit. What we have is a shortage of people who can afford the housing," said Michael Shane of the Moratorium NOW Coalition, an organization of groups trying to stop tax foreclosures.

The groups say several things beyond homeowners' control have dragged tens of thousands of them into financial holes, including Detroit's inflated property taxes, for years among the country's highest; the nationwide housing crisis that drove down real estate prices; and the loss of jobs as the auto industry collapsed.

The population has plummeted, too. In the 1950s, the city had more than 1.8 million people, but it now has fewer than 700,000 and a poverty rate of 39%, according to U.S. census figures.

"Look at how many people have fled the city just in the last decade," said Michael LaFaive, the director of fiscal policy at Michigan's Mackinac Center for Public Policy. "Most of the folks who are left are the ones who simply cannot afford to leave."

Wayne County alerted 62,000 Detroit property owners that they were facing foreclosure this year after falling behind on property taxes. The problem has festered here for years, but it is under the spotlight now because of the positive changes being trumpeted post-bankruptcy.

Much attention has been paid to the purchase of property by big-time investors such as Quicken Loans founder Dan Gilbert, a Detroit native, and the opening of offices and residences in the once-grim downtown area. Restaurants, bars and shops, including a Whole Foods market, give parts of downtown and midtown a sense of rejuvenation.

"It's really exciting in Detroit right now," Mayor Mike Duggan said in January as he toured the riverside convention complex where the glittering North American International Auto Show was being held. "If you come into Detroit now and just spend time, you can feel the resurgence. You can feel the jobs coming back."

Not far from downtown, though, blocks of once-stately Victorian homes are dotted with the scorched carcasses of vacant buildings stripped of light fixtures, doors, railings and wiring and then torched by vandals. Yellow fliers are posted on some, marking them for demolition.

Duggan has acknowledged that property taxes are strangling many residents, and the city has begun a reappraisal aimed at correcting them. It will take two years to reassess all properties, said David Szymanski, chief deputy for the Wayne County treasurer.

For now, Detroit homeowners with homes assessed at $150,000 are charged 3.3%, or $4,900 a year, in property taxes, compared with $1,790, or 1.188%, in Los Angeles, according to the Lincoln Institute of Land Policy, a research center in Cambridge, Mass. An added problem in Detroit is the interest rate charged to delinquent homeowners: 18%.

In January, Duggan said residents should see declines of 5% to 20% when tax bills go out in June. In addition, Szymanski said, recent legislation signed into law will cut interest rates and cap delinquent taxes for those who owe more than one-fourth the value of their property.

Groups like the Moratorium NOW Coalition and Detroit Eviction Defense, composed of volunteers who work to help people facing foreclosure, say the system is so badly broken — because of tax rates and outside investors scooping up property on the cheap and evicting residents — that foreclosures should be halted at least temporarily. Otherwise, the groups say, Detroit's poor and working-class residents will be run out of the city that they helped build during its boom years.

"Detroit is a perfect target right now to just come in and take over, and that's not right," said Dawn DeRose, a social worker who volunteers with Detroit Eviction Defense, which meets each Thursday evening at a church in Detroit.

Shane said it's time for a "timeout" on foreclosures. "Don't kick people out of their homes if they have nowhere else to go," he said.

Given Detroit's high crime rate and the desperation of people to remain in their homes, some critics of the system say it's surprising that there has not been more violence associated with property disputes.

Howard Franklin paid $35,750 for the 6,000-square-foot property in the upscale Rosedale Park neighborhood. According to public records, he got the deed on Nov. 11. He went to the house the day after Thanksgiving with his daughter and two other people to begin cleaning up.

Long's attorney, Charles Longstreet II, said that his client was there helping his relatives move out and that he fired in self-defense when Howard and Catherine Franklin, who each had a gun, tried to take the eviction into their own hands.

"The foreclosure issue comes into play because it's the defense's position that the landlord did not go through the proper channels," said Longstreet, who accuses the Franklins of failing to abide by ordinances that require a court bailiff to execute an eviction.

A police report said that Howard Franklin did not fire his gun and that it was found in his pocket, although some witnesses dispute this. Long fired his weapon, and Catherine Franklin fired hers.

In the hours before the shooting, several calls were made to 911 seeking help in getting the previous occupants out of the house, according to the report, which refers to those occupants as "squatters."

A relative of Howard Franklin agreed.

"When you don't pay any taxes for two or three years, what are you? A squatter," said the relative, who did not want to be identified because of the publicity about the case. "The records show that Mr. Franklin did own the home. Some people are making it look like Howard and Catherine were the villains versus the victims. It's very hurtful."

Long, 22, pleaded not guilty to two counts of first-degree murder.

Critics of tax foreclosures say if the county limited sales to unoccupied homes, it would prevent blight by staving off the vandalism that often follows an eviction. "The best way to stabilize a neighborhood is to keep people in the neighborhood," DeRose said during a Detroit Eviction Defense meeting in January.

Kenny Brinkley was at the meeting, looking for help staying in the house that he has lived in since 1955. Brinkley, a saxophonist who was a Motown fixture for decades, lost it to a foreclosure in 2010 after he had heart surgery and fell behind on property taxes. After a real estate company bought the home, Brinkley and his longtime companion, Sandi Combs, paid $300 a month to the company to remain in the house.

The company failed to pay property taxes, and last November, the house was auctioned off to another real estate company, which wants to evict the couple.

"Out of the clear blue sky, this is what I get," said Brinkley, 82. He tried to work out a tax payment plan with the county, he said, but he got no response to his phone or in-person queries. "I'm doing everything right, but it seems like I'm doing everything wrong."

As Brinkley stood on his front porch, shaded by two blue spruce trees planted by his late aunt, a neighbor was loading furniture into a rented truck. Public records showed that the neighbor's house was sold at auction in November after a tax foreclosure.

LaFaive said a moratorium on such sales probably would cause more blight, because people with impossibly high bills eventually would abandon the homes. But he also said the people and real estate companies buying homes were no guarantee of Detroit's long-term recovery.

"A lot of money is pouring into the city, and people are grabbing property at very low interest rates and lower costs as well. But as soon as interest rates start going up, everything becomes more expensive," LaFaive said. "And if we face another recession, and it doesn't even have to be a great one, the city could find itself right back where it was a couple of years ago."


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