Banks Walk Away On Foreclosures
Global Economic Analysis
31 Marzo 2009
Homes, who wants 'em? No one it seems.
Please consider Banks Starting to Walk Away on Foreclosures.
Mercy
James thought she had lost her rental property here to foreclosure. A
date for a sheriff’s sale had been set, and notices about the
foreclosure process were piling up in her mailbox.
Ms. James had
the tenants move out, and soon her white house at the corner of Thomas
and Maple Streets fell into the hands of looters and vandals, and then,
into disrepair. Dejected and broke, Ms. James said she salvaged but a
lesson from her loss.
So imagine her surprise when the City of
South Bend contacted her recently, demanding that she resume
maintenance on the property. The sheriff’s sale had been canceled at
the last minute, leaving the property title — and a world of trouble —
in her name.
“I thought, ‘What kind of game is this?’ ” Ms.
James, 41, said while picking at trash at the house, now so worthless
the city plans to demolish it — another bill for which she will be
liable.
City officials and housing advocates here and in cities
as varied as Buffalo, Kansas City, Mo., and Jacksonville, Fla., say
they are seeing an unsettling development: Banks are quietly declining
to take possession of properties at the end of the foreclosure process,
most often because the cost of the ordeal — from legal fees to
maintenance — exceeds the diminishing value of the real estate.
In
Ms. James’s case, the company that was most recently servicing her loan
is now defunct. Its parent company filed for bankruptcy and dissolved.
And the original bank that sold her the loan said it could not find a
record of it.
In Buffalo, where officials said the
problem had reached “epidemic” proportions in recent months, the city
sued 37 banks last year, claiming they were responsible for the
deterioration of at least 57 abandoned homes; the city chose a sampling
of houses to include in the lawsuit, even though the banks had walked
away from many more foreclosures. So far, five banks have settled.
In
Kansas City, Rachel Foley, a lawyer who handles housing cases, said
bank walkaways were “a rare occurrence two to three years ago.”
“We’re seeing them dumped more and more at the moment,” she said.
In
Ms. James’s case, it has been impossible to determine who canceled the
sheriff’s sale, since her last mortgage holder went out of business.
Even the city clerk’s records did not provide an answer.
“Nobody
has any idea who owns what or who’s responsible,” said Judy Fox, Ms.
James’s lawyer at the Notre Dame Legal Aid Clinic. “It’s a very common
story.”
Abandoned Homes, Abandoned Cities
The above tactics are fueling something I talked about last week in
America's Abandoned Cities.
Property
abandonment is getting so bad in Flint that some in government are
talking about an extreme measure that was once unthinkable -- shutting
down portions of the city, officially abandoning them and cutting off
police and fire service.
Homes in Flint and
other such areas, have indeed fallen to their true value (less than
zero). No one wants them at any price. Moreover there's little
incentive for anyone to do anything about this. Thus the discussion
involves "shutting down portions of Flint, officially abandoning them
and cutting off police and fire service."
Our throw-away society has effectively reached a new level of efficiency: the throw-away city.
Walk Away Recap
I have talked about Walking Away on many occasions. Here is a sampling.
Everyone
is looking for a way out. Some are angry that home owners are waking
away from houses sticking banks with properties. What about banks
walking away from houses? What about cities abandoning sections of
cities?
Imagine praying to be foreclosed on then having the bank
walk away from the foreclosure sale because your home is no longer an
asset to anyone. You don't have to imagine it, it's happening.
Mike "Mish" Shedlock
Source > Global Economic Analysis | Mar 30
