It's no secret that Cleveland and Cuyahoga County are known globally as ground zero in the foreclosure crisis. Now the CEO of the Federal Reserve Bank of Cleveland says fed researchers see weak state regulation of mortgage lenders in Ohio earlier this decade as largely responsible for the devastation. GOP lawmakers refused to strengthen the rules. The news comes after thousands of homes are empty and neighborhoods have been wrecked.

Sandra Pianalto spoke today (Nov. 17, 2009) to the Ohio Housing Conference in Columbus. Near the end of her address, which Ohio Daily has at this link, she points to the cause. She did not mention that it was Republicans in the state legislature who blocked attempts to curb unscrupulous and predatory mortgage lenders. She did say that Pittsburgh in 2007 escaped the kind of abuse Cleveland suffered. Fed CEO Pianalto said a "small number of nonbank mortgage companies" are behind the foreclosures in Cleveland. She said losses and hardship were left in the wake of the predators and "decades of progress have been wiped away in many low-income communities in this dramatic two-year burst of foreclosures." She didn't mention that Ohio lawmakers repealed a Cleveland City Ordinance in 2002 that tried to buffer the city. And she didn't point out that national mortgage lenders abandoned the city to predators.

But Pittsburgh did not take such a hit, apparently because the rules were tougher in that state. In other words, the regulatory climate was stricter at the state level:

"Data analysis is helping us uncover what factors contributed to very different foreclosure rates in 2007 among demographically similar neighborhoods in Cleveland and Pittsburgh. Here we have two similar communities that are located in different states, with different legal and regulatory environments. Yet Cleveland’s foreclosure rates are far greater than Pittsburgh’s, especially in poor neighborhoods.

"One major discovery of our research was that most of the mortgage lending in Cleveland’s poorest areas was originated by a small number of nonbank mortgage companies. However, this source of lending was not nearly as much of a problem in Pittsburgh. Residents of poor Cleveland neighborhoods appear to have less access to, or less reliance on, traditional financial service providers.

"We are working to understand why such differences exist between the foreclosure experiences of these two communities and where some improvements might be found, such as in the way states regulate and supervise the mortgage origination process."