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CNN/Money on Foreclosure & Crime

posted by Bob Lawless

The CNN/Money web site currently has a story about the link between crime and foreclosure rates. This relationship should come as no surprise, and the CNN/Money story is not the first source to point it out. As foreclosure rates increase, home ownership declines, and vacant houses and vacant lots become havens for criminal activity. The CNN/Money story has a new twist, however, as it reports how criminals are looting abandoned houses in a hard-hit Cleveland neighborhood for the siding, PVC, copper, and other materials within the structures.

Increased crime rates are just one externality of the subprime crisis and climbing mortgage foreclosure rates. The costs did not just fall on the lending institutions and borrowers foolish or unwise enough to make these loans. The costs also are being borne by the communities with a high incidence of mortgage foreclosures. The subprime crisis is not just a market failure that the market can correct. It's also causing losses that the market participants have no incentive to fix because the they are not the ones bearing these externalized losses.


Maybe our high foreclosure rate in Detroit explains our dubious victory in being now crowned most criminal city (take that St. Louis)!

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  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.