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| Economy |
| Latest Ones to Walk Away from Foreclosed Properties....Banks! |
| 2009-03-31 |
| Just when the news had all those happy stories about sales picking up last month.... 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. The so-called bank walkaways rarely mean relief for the property owners, caught unaware months after the fact, and often mean additional financial burdens and bureaucratic headaches. Technically, they still owe on the mortgage, but as a practicality, rarely would a mortgage holder receive any more payments on the loan. The way mortgages are bundled and resold, it can be enormously time-consuming just trying to determine what company holds the loan on a property thought to be in foreclosure. 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. "It is what some of us think is the next wave of the crisis," said Kermit Lind, a clinical professor at the Cleveland-Marshall College of Law and an expert on foreclosure law. The problem seems most acute at the bottom of the market -- houses that were inexpensive to begin with -- and with investment properties, where investors and banks want speedy closure by writing off bad loans as losses. Banks and investors typically lose 40 percent to 50 percent of their investment on every foreclosure. Guy Cecala, publisher of Inside Mortgage Finance, an industry newsletter, said some properties had become such liabilities for investors that it was not even worth holding on to them to strip valuable fixtures, like kitchen appliances, toilets and hardware. "The whole purpose of foreclosure is to take title of the property, sell it and recoup what money you can," Mr. Cecala said. "It's just a sign of the times that things are so bad no one wants to take possession of the property." 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." Mayor Stephen J. Luecke of South Bend added: "It's just a crime the way it puts people in limbo. They first off have gone through the grief of losing their house, then they move out and find out that they still own it and have responsibility for it." |
| Posted by:Cornsilk Blondie |
| #1 Put them all in Barney Frank's name. This is what happens when people that don't know what they're doing try to cash in on the Ponzi scheme. |
| Posted by: AlanC 2009-03-31 15:07 |