Cleveland: Sub-Prime Capital of the United States
Investors and markets are in fear that banks could have around $1 TRILLION in toxic debt or so-called sub-prime debt.
BBC News shows Cleveland, Ohio, as the sub-prime capital of the United States. One in ten homes in the city is now vacant, and whole neighborhoods have been blighted by foreclosed, vandalized, nd boarded-up homes.
Cleveland is thought to be facing a rising crime wave, and the cost of demolishing the vacant houses alone will cost the city $100 million of its tax base.
Jim Rokakis, the County Treasurer for Cleveland's Cuyahoga County:
"Wall Street strategies that made the cycle of no-money-down, no-questions-asked lending possible have sucked the life out of my city".
Sub-prime mortgages carry a much higher risk of default by the borrower than other kinds of mortgage lending.
That is because most of them are "balloon" mortgages (technically known as hybrid-adjustable rate mortgages, or ARMs), which offer the borrower a fixed-rate loan for two or three years, and then switch to a much higher adjustable rate after that.
Many of them are set to switch in the next two years, leaving borrowers unable to afford the higher payments.
Claudia Coulton, co-director of the Centre for Urban Poverty at Case Western Reserve University in Cleveland, over 10,000 families - one in eight of all owner occupiers in Cleveland - will face eviction this year - and the number is expected to rise.
She says the crisis is threatening to "overwhelm the government agencies and community organisations that address the problem".
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