Foreclosure: It's not just for poor people neighborhoods anymore

Posted at 1:59 PM on November 27, 2007 by Bob Collins (5 Comments)

After visiting with a few residents of the Corcoran neighborhood last week to discuss the effect of the mortgage foreclosure crisis on their neighborhood, one resident sent this e-mail the next day:

If the focus of your story is to use our neighborhood to educate the public about the foreclosure problem/process in general - we would be disappointed - Adding the stigma of the foreclosure issue to our already PR-challenged neighborhood would not be helpful right now. We would ask you to pick a foreclosed property in Woodbury, Edina or Minnetonka for that purpose.

It's a fair point. The mortgage foreclosure crisis isn't just another blot on lower-income neighborhoods. Sometimes it's a blot on the toney ones, as a search of Hennepin County's foreclosure database shows.

Take 813 Kenwood Parkway, one of the higher-priced homes in foreclosure in the city.

Kane Loukas, 30, purchased it for $687,500 in July 2005. With an estimated market value of $650,000 -- and a $10,000 a year property tax bill -- it went into foreclosure and reverted to the bank for $579,000.

What happened? Every picture tells a story, but not the entire one.

This is the front yard. A garage project gone bad.

"My neighbors hate me now," Loukas said Tuesday. "It was during the tech boom when I was still in college. I was able to trade and make money too easily. I thought the party was just going to keep on going. I'd just started a new business (renovating and then selling converted condominiums). I had two projects in process, and I'd just bought a mansion in the nicest neighborhood in Minneapolis. It almost seemed too easy."

And, of course, it was. Loukas intended to use the proceeds from his firm's condo conversions to rehab the mansion, then sell the duplex at a profit.

Back then -- 2005 -- he found a mortgage broker willing to lend him the money with nothing down. "I (think I might've) even got cash back on the deal," he said. The mortgage, taxes, and the cost to renovate took $6,500 a month. When the real estate market softened, he couldn't sell the projects funding the mansion. Foreclosure was, he says, the only solution after attempts to sell the property failed.

His troubles aren't over, even though his construction business is starting to bounce back. He'll get a big tax bill for the difference between the mortgage and the amount the bank accepted at auction. The government will treat that $100,000 as income. the remaining amount of the mortgage. The IRS treats the unforgiven amount as income.

"You really learn, though, it's only money," he said.

Lots of other investors are learning that, too. According to the Minnesota Housing Partnership, 50 percent of mortgage foreclosures in the area are on properties that were owned by investors.

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Comments (5)

As the primary source in this article, I was very disappointed to see how Collins reported this.

First, I didn't know I was on the record. I was glad to talk about it as part of what I told was research on foreclosures.

Second, not only did Collins fail to capture the basic facts of the foreclosure, he misquoted and changed my language to misrepresent my approach to the foreclosure and its seriousness to me, my employees, and my neighbors.

As for the quote, "You really learn, though, it's only money", it was taken out of context.

What I said is that "when you lose everything that you worked for, you learn what's important. Money isn't everything. I have my health and so does my family. I'm working to rebuild and I have a long way to go."

Lastly, in the headline "It's not just for poor people anymore," implies that only the poor in are in foreclosure. False. And it implies that I am rich, especially followed up with discussion of the tech boom and easy money. In addition to being misquoted, also untrue.

Improve your reporting and research.

Thanks for providing this forum.

Kane Loukas

Posted by Kane | December 29, 2007 5:35 PM

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As the primary source in this article, I was very disappointed to see how Collins reported this.

First, I didn't know I was on the record. I was glad to talk about it as part of "research on foreclosures for a future story."

Second, not only did Collins fail to capture the basic facts of the foreclosure, he misquoted and changed my language to misrepresent my approach to the foreclosure and its seriousness to me, my employees, and my neighbors.

As for the quote, "You really learn, though, it's only money", it was taken out of context.

What I said is that "when you lose everything that you worked for, you learn what's important. Money isn't everything. I have my health and so does my family. I'm working to rebuild and I have a long way to go."

Lastly, in the headline "It's not just for poor people anymore," implies that only the poor are in foreclosure. False. And it implies that I am rich, especially followed up with discussion of the tech boom and easy money. In addition to being misquoted, also untrue.

Please improve your reporting and research.

Thanks for providing this forum.

Kane Loukas

Posted by Kane | December 29, 2007 5:45 PM

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Hi, Mr. Loukas:
I'm sorry you felt you were off the record. As you know, I sent you an email in advance of our conversation and I believe I indicated I've been talking to people who've gone through foreclosure for pieces I've been writing. I've also been researching various stories that are out there for a possible project on foreclosures that I thought I might pitch to the bosses. Normally, when a reporter calls someone, it's on the record. If someone asks to go off the record, then anything that's said is off the record. I apologize for the confusion.

The headline to the post wasn't meant to imply that only poor people go through foreclosure, but to acknowledge that wealthy neighborhoods, too, are affected by the foreclosure situation. It wasn't mean to imply that you were rich, although as you pointed out you had projects going well and you'd bought "a mansion in the nicest part of Minneapolis." In think you have to admit, your situation contrasts with the Corcoran neighborhood house I profiled earlier.

Regarding your quote out of context, to provide additional context to what you provided, it came in answer to my observation that for all you've been through, and all you face, you seemed remarkably calm.

I very much appreciate you clarifying your points and wish you the best.

Posted by Bob Collins | December 29, 2007 5:55 PM

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In the interest of transparency, I am posting an e-mail from Mr. Loukas I received today. Following is the my reply. I have also made a change in the title of the post from "people" to "neighborhoods."

From: Kane Loukas
Sent: Saturday, December 29, 2007 6:35 PM
To: Collins, Bob
Subject: Your story on Foreclosures : 11-28-07

Dear Bob,

I was doing a search to check if ownership had transferred for 813 Kenwood Parkway and found the News Cut article that features me as your primary source. I was disappointed by your grasp of the facts and how you represented my experience with this foreclosure.

During our conversation you said you were RESEARCHING foreclosures for a possible future story. You did not make clear that you were using me as a source, especially a primary source since we had talked for maybe 10 minutes. If you want to use me as a source, I am glad to participate so long as you accurately represent my experience. The following items include some of the inaccuracies in your story:

First, and most importantly, there are phrases, vocabulary and terminology that I don’t use that you’ve included as direct quotes in this story. For example, I don’t use the word “mansion” since it would be inaccurate in describing 813 Kenwood Parkway and I certainly wouldn’t have said “cash back on the deal”.

Second, you linked together my experience trading during the tech boom and the condo conversions as if I was just chasing easy money as an uninterrupted string of events. That simply wasn’t true and your quote is not accurate.

Third, your tax bill paragraph is incorrect. The value of the debt forgiveness is incorrect as is the process. I made it clear to you that you’d need to do more research on this as I wasn’t sure of the process.

Lastly, you took the following quote out of context: “You really learn, though, it’s only money.” I did say that, but it was part of a much larger discussion of how I had lost everything, how I have a long way to go to rebuild and that I at least still had my health and that of my family.

I understand that News Cut tries to look at stories from a different angle, and I think that is valuable and much needed. But you didn’t do that. Instead, you typecast me as a freewheeling, get-rich-quick developer. As you know from our conversation, I’m a small business person from a very modest family (mother on welfare and father who makes $10/hr working retail). Your representation of me and my experience in this foreclosure are misconstrued.

Also, the headline implies that only the poor are in foreclosure. I know it’s tough to write an elegant headline, but that one implies an untruth.

Please pull this story until you correct it.

If you choose to keep it posted, please do me and MPR the courtesy of correcting the inaccuracies in your story. I’d be glad to do a follow-up interview so you can get some of the quotes correct as well as some of the general facts of foreclosures.

I look forward to your response.

Sincerely,
Kane Loukas

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Hi, Mr. Loukas:
I am going to post your point to the story. I'm not going to rewrite the quotes because I believe them to be accurate according to my notes. I agree with you that the house is not a mansion, but distinctly remember -- and the notes confirm -- the term as at the time I didn't regard it as a mansion either. You are correct that the quote on "I even got cash back on the deal," according to my notes. But the actual quote (in which you described the original financing), was "I THINK I might've even got cash back on the deal."

The value figures used, as I believe the source and the link indicates, is based on the records in the Hennepin County foreclosure database at the time. I don't know whether those numbers are or were correct, which is why I attributed them.

I don't believe you've been painted as a freewheeling, get rich quick developer. In fact, I didn't characterize you in any way. I wrote how you came into possession of 813 Kenwood lParkway, and how it came to foreclosure. In no place in the story did I use any adjective of ANY kind to describe you and that was deliberate. I merely wanted to take a piece of property and write how it came to be in foreclosure. As far as I know, the events you described to me were accurately stated.

The headline is not meant to refer to you. It referred to the point that the gentleman from the Corcoran neighborhood made (first paragraph, I believe), that foreclosure affects the "wealthy" neighborhoods as we all as the poor ones. Your point is a valid one, however. The use of "people," rather than "neighborhoods" can lead to the wrong conclusion and I will mostly certainly change that with my apologies.

When we talked about "only money," it was actually in response to my observation (I believe it might've been the last question I asked), that for a guy who has gone what you've gone through, you seemed remarkably calm (I believe I said that your story is the dream I have that wakes me up at night). That should've been better developed and I've attached your comments to it to do so.

Mr. Loukas, I don't have the original e-mail I sent you (in a fit of OCD, I cleaned out my Outlook SENT file on November 30) , nor is it something I would specifically write down int he notes, but I've never gone off the record with anybody without advising them that we're off the record. It's true I have been researching foreclosure stories with an eye toward a larger project, but that isn't to the exclusion -- nor have I told anyone is was to the exclusion -- of the facts or identities of those people I've talked with. I believe I mentioned that I've been finding various properties in the region, and then talking to the owners to find out how they got to be in foreclosure. There is simply no reasonable reason that I can think of for me to locate actual properties in foreclosure with an eye toward telling the stories of how they got there, and leave out the only source of the information of how they got there.

To the extent that you believe there are inaccuracies in the foreclosure statistics or process, I am more than willing to post that information.

I am very truly sorry for any confusion in this.

Regards,
Bob

Posted by Bob Collins | December 30, 2007 10:17 AM

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I was wrong, I didn't delete the original e-mail that led to this post. It is as follows. I believe it fairly portrays why I was contacting owners of foreclosed properties.

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Dear Mr. Loukas:

My name is Bob Collins, I'm senior editor for Minnesota Public Radio. I'm writing a series of short stories on the mortgage foreclosure crisis, and am talking to various people who have lost property in foreclosure to see if they are interested in talking about their experiences that led to foreclosure.

I'm wondering if you were the owner of 813 Kenwood Parkway and, if so, would you have some time to chat about the events that led to its present situation?

Thanks so much for your consideration,

Bob Collins
651.290.1414

Posted by Bob Collins | December 30, 2007 10:25 AM

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