As bank-owned foreclosed properties pile up across the country, from abandoned houses in hard-hit neighborhoods to empty big box retail stores in failed strip malls, the battle to hold someone responsible for the brick-and-mortar mess left behind by the mortgage crisis continues to heat up.
More than two years into the crisis, local authorities still are slapping banks, servicers and speculators with fines ranging from $30,000 to even $90,000 for ignoring orders to take care of foreclosed and vacant properties under their control. The continuing punitive measures come as servicers find themselves under fire for failing to complete more loan modifications under the Obama Administration’s Making Home Affordable program – an effort that includes $75 billion in taxpayer money as incentive for the lending industry to rework loans. And it also comes as some realtors and lenders are mounting challenges to local anti-blight ordinances, and promoting the use of a mortgage database to track down servicers. Some housing advocates fear the industry will go beyond lobbying for the use of its mortgage system to push for getting rid of local vacant property laws altogether.
The end result: Some of the same servicers the Obama Administration is urging to complete more loan modifications still are walking away entirely from vandalized homes, or failing to fix broken windows, get rid of junked cars, clear trash, repair damaged roofs and gutters, or even demolish a condemned house, all of which can be violations of local housing codes. And housing courts keep hearing persistent arguments from servicers that they’re merely temporary custodians who can’t alienate investors by spending money to bring properties up to code.
“They may think it’s unfair, but the law provides that if you have ownership of a property, you take care of it,” said Cleveland Housing Court Judge Raymond Pianka, who regularly fines lenders $5,000 a day for properties that don’t comply with city codes. “There’s no provision to exempt corporations. I’m not going to treat them any differently than the individual property owners who come into my courtroom in wheelchairs and walkers.”
And while the lending industry contends its working more cooperatively than ever with local authorities, not everyone sees it that way.
“For every one vacant property owner who wants to work with the local government, there are five other property owners who are gaming the system,” said Joseph Schilling, a Virginia Tech urban affairs professor and co-founder of the National Vacant Properties Campaign. “My sense is the industry is also overwhelmed, almost as much as the code departments, and properties still fall through the cracks.”
Controversies over vacant properties are one sign of how the aftermath of the mortgage crisis may be as complicated to address as the initial waves of foreclosures themselves.
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