Confusing Legacies of the Foreclosure Crisis
In San Diego during the heydays of the housing boom a company named Accredited Home Lenders had boasted that they offered an exceptionally broad range of sub-prime mortgages for brokers dealing with wholesale mortgages. On the Internet they crowed, “Send us your toughest loans, and let us earn your business”. The peak swelling years lasted from 2005 to 2007. Accredited roped in $29 million from the business in sub-prime mortgages.
One of the loan takers was Domingo Cedano who took a mortgage for $384,000 in 2005 November. With it he bought a house on Prospect Avenue in Bronx. The mortgage carried a monthly premium of $2,491. Cedano did not have to make any down payment.
Cedano has discontinued payments, the property has entered foreclosure zone and the company that did the lending has become bankrupt.
Then a fire broke out and killed three persons living on the top floor. There were rooms inside rooms giving the impression of the floor being a rabbit’s warren. The walls that had been built without any sanction blocked the route to the fire escape for the family comprising of the parents and their twelve year old son.
Who was responsible for the building becoming a rabbit’s warren? Who can be held accountable for this mishap? This is one of the most confusing legacies of the sub-prime years – the mythical invisibility about who is the owner.
Contracted loans were bundled into packages and sold as securities to global investors; repeated trading took place. The link between the lender and the borrower disappeared into thin air. Often these bundles were sold via public filings but not always. The loan of Cedano began its journey from San Diego and then travelled to Flint in Michigan. Finally it was taken by a firm in Oklahoma City.
It is a year now that state law has made it clear that the responsibility of the property is with the plaintiff as soon as it is foreclosed upon.
State Senator Jeffrey D. Klein (Democrat/Bronx) who was sponsor of this bill said, “The legislation required that once a foreclosure takes place, it’s up to the bank or whoever foreclosed on the property to take care of it, maintain it, make sure it’s safe. If not, the local building department can go in and make the proper repairs”.
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