It has Become a Common Feature in Some Badly Foreclosed Regions for Banks to Abandon Houses
It has become a common feature in some badly foreclosed regions for banks to abandon foreclosed houses leaving the headache to the neighbours, the community and even the exited house owners. The banks do not put up these houses for sale in the real estate market – neither buying it nor giving a third party chance to purchase it.
These vacant units attract criminals and vagabonds, bring down the property prices of the adjacent houses and reduce tax collection. Sometimes the exited house owners whose names have not been removed are asked to foot the bills, the taxes and see to maintenance or face penalties for code violations.
A report by GAO (Government Accountability Office) has highlighted this problem. It noted that most of the vacant units were in the poor neighbourhoods. The metropolitan area of Cleveland that includes the counties of Cuyahoga, Geauga, Lake, Lorain and Medina noted 497 foreclosed abandoned units. In Ohio there were 1,544 such units.
The report also noted that the servicers generally abandoned foreclosed units when they calculate that the costs behind it are more than what can be made from selling the property.
The agency interviewed some servicers and found that many servicers were not always updated on property values prior to starting on foreclosures. If they had done so they might have stopped proceeding with this right from the beginning; they would have decided that the foreclosure was not worth it.
The GOA has suggested that Office of the Comptroller of the Currency as well as the Federal Reserve stipulate that the servicers of mortgage give proper notice to the borrower regarding charging off loans and not foreclosing; the borrowers should also be informed by the servicer about their rights to continue residing in their houses and discharging their responsibilities relating to the property.
Also the servicers must notify the local administration when they abandon a unit and obtain current property value rates in advance prior to starting foreclosure in places where there is a high concentration of such units.
The GOA felt that the involvement of the Congress would perhaps be necessary to see to that the federal regulators have the proper authority to enforce the mandates.
Senator Sherrod Brown said, “In this difficult time, we should be doing all that we can to help American families stay in their homes, and this is yet another area of the mortgage servicing industry where a few common sense reforms could potentially help thousands do just that”.
