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.Abandoned Homes, Abandoned Cities
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.”
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."