The Chicago Tribune has a very good article about how vacant properties (due to the foreclosure crisis) are decimating poor communities because of the increase in crime. This is something that I speak about at length when I teach my class on the relationship between law enforcement and code enforcement. These vacant buildings are crime magnets and can’t be torn down quickly enough. Vandals steal everything and anything from these buildings so people who might want to invest in and rehab them walk away in frustration. The remaining residents live in fear as the neighborhood gets even worse. It’s a pretty depressing tale but important to know about.
This story is too delightful not to post. Bank of America filed a foreclosure lawsuit against a homeowner despite the fact that the homeowner bought his house in cash and had no mortgage. The lawsuit was dismissed but Bank of America was ordered to pay his legal fees. After waiting awhile for the check, the homeowner decided to use one of the remedies available to creditors, having the Sheriff seize the debtor’s property. The Sheriff went to a local office of Bank of America in Naples, Florida to seize furniture, etc. but the bank manager managed to come up with the money owed the homeowner. You can find the story at news-press.com.
Thirteen percent of U.S. homes are now vacant according to a new report in the Huffington Post. Prices are dropping but people who have the money to buy are reluctant to enter the housing market fearing prices will drop even more. I think we’d hope that by now things would turn around but I’m not seeing much change in the areas around the country where I do seminars. I’m very concerned about properties that still appear to be owned by individuals but that the lenders actually own. Recently I was researching a property that the former owner told us he turned over to a lender last summer. He was right. We didn’t know though because the lender had never filed the necessary paperwork with the Recorder of Deeds. Consequently, all notices of violation went to him and not the lender. Whether this was an oversight or intentional, I have no idea but it sets us back even further in identifying the responsible party. I’m also seeing a number of judgments for foreclosure where the sheriff”s sale has never taken place. Sometimes this is due to a bankruptcy being filed but in other cases it remains a mystery. This is why ordinances to make lenders responsible for the upkeep of the vacant property prior to a foreclosure judgment are so critical to preserving neighborhoods.
There’s a bill pending in Illinois which would allow local governments to pass ordinances that would make lenders responsible for the upkeep of vacant properties in foreclosure. Needless to say, the lenders are fighting the bill. They’ve proposed a $50 fee per foreclosure that would go into a pool that local governments could draw from to reimburse themselves for their costs. $50 per property, hmmmm, that’ll go really far. Maybe it’ll cover half a lawn being cut, once. They must really think we’re stupid. I’m disheartend that when I contacted my state rep, I received a nice “thanks for your e-mail” message, completely ignoring the expertise on this issue I’ve developed. The banks say that they just wouldn’t be able keep up with all of the municipal ordinances that might be passed; maybe they would then know what it’s like to be an inspector who is desperately trying to reach a live human being at a lender when a property has 6 feet of water in the basement of a vacant home under foreclosure. I wish I wasn’t so cynical about the political process. I wish I believed it was possible that politicians would do the right thing and help local government preserve neighborhoods. I want to believe that if they only knew about the problems we face, they’d give us some meaningful tools. But, if they ignore our attempts to educate them, how can they make an informed decision?
I recently completed a 2 month period of travel all over the Midwest doing trainings for building officials, fire inspectors, property maintenance and housing inspectors and law enforcement officers in Columbus, Ohio, East Liberty, Iowa, South Bend, Indiana, Troy, Michigan, East Peoria, IL and Sheboygan, Wisconsin. All of them are facing challenges because of the foreclosure crisis and are trying to respond with reduced resources. I want to say how much I appreciate the hospitality I received wherever I went and the enthusiasm of the participants. It gives me great hope when I see the number of inspectors who take the time to come to the classes I teach so they can enhance their skills and keep trying to improve their communities. At a time when so many public employees are feeling unappreciated and under attack, I just wanted to extend my thanks to everyone who made my trainings a rewarding experience.
Should lenders allow buyers to purchase a foreclosed building for less than what the lender can get for the property so the buyer has enough money left over to fix it up? That’s the question posed in an article in the Wall Street Journal, Tenants Turn to Lenders to Repair Buildings. Some housing groups are pressuring lenders to do this because it does no good for a building to change hands if the new owner can’t bring the property up to code. It’s a novel approach to the problem of deteriorating properties.
In the past I’ve recommended books on the foreclosure crisis such as Michael Lewis’s The Big Short. Last night I finally got to see “Inside Job”, the film that won the Academy Award this year for best documentary. It methodically lays out how the problem developed, the nature of the crisis and the response by both government and Wall Street.
‘Inside Job’ provides a comprehensive analysis of the global financial crisis of 2008, which at a cost over $20 trillion, caused millions of people to lose their jobs and homes in the worst recession since the Great Depression, and nearly resulted in a global financial collapse. Through exhaustive research and extensive interviews with key financial insiders, politicians, journalists, and academics, the film traces the rise of a rogue industry which has corrupted politics, regulation, and academia.
It’s interesting that public employees are being blamed for the money woes in this country when the entire financial crisis was Robin Hood in reverse, steal from the poor (or middle class), and give to the rich. I encourage everyone to rent the DVD of this film so we keep our focus on the people and systems that brought this all about. If we don’t, we will find ourselves in the same situation in the future. Charles Ferguson, the director, said, when accepting the Academy Award, that none of the people in the film have been indicted and no one’s gone to prison. After watching the movie, you’re going to ask “why not ?”
One of the most difficult situations I deal with as a prosecutor is trying to find someone to take responsibility for a property where it is in foreclosure, the owners have abandoned the building and the lender fails or refuses to complete the foreclosure process. Some nonprofit organizations are stepping in under those circumstances and using state laws on abandoned properties to take them over, fix them up and then sell them. One such organization is featured in an article in the Huffington Post. Unfortunately, in some states, the waiting period for action is lengthy. While the clock is running, the property continues to deteriorate. It is shocking to me that legislatures fail to address the problems these derelict properties create for communities and local government. Far too often state law protects lenders from having to take possession of these properties and maintain them prior to the foreclosure judgment even though the owners are no longer around and the mortgage document gives the lender the right to ask for possession. These nonprofits that take on this difficult task should be applauded for their efforts but there aren’t enough of them to make a dent in this horrendous problem.
Is your city included in this list: http://www.huffingtonpost.com/2011/03/30/foreclosures-ghost-towns_n_840663.html#s259246&title=Cleveland_Ohio ? It shows us that the crisis is not behind us yet and we’re going to continue to have problems for a long time. If you have a similar situation, let me know how you’re coping with it.
I was recently contacted by someone who is gathering data on the housing market with a special interest in the health of condominium associations. He was concerned that many of them, especially those that are recent conversions, are struggling financially as more and more units are subject to foreclosure. This raises problems for inspectors. If an association falls apart. who is responsible for common area problems? I’ve had this situation happen a number of times, especially with fire code problems and building code violations. The first question that needs to be answered is how is title held regarding the common area in a condominium development? In some developments the title is held by the condo association but in others, each unit owner owns an undivided share of the common area. After that question is answered, the next one is: what does the declaration of condominium say about who or what is responsible for the upkeep and repair of the common area? Typically the association is responsible. If the association owns the common area and is responsible for its upkeep, the answer is easy. I tell the inspector to notify and cite the association if necessary. I’ve known some jurisdictions that have even helped associations get reinstated that had lapsed. However, if the common area is owned by the individual unit owners, it gets trickier. If the association is responsible for the upkeep under the declaration, then it is in control of the property and is considered an “owner” under the IPMC. However, if the association doesn’t exist, who does the inspector pursue? In that case, all of the owners are responsible and should be notified and cited if necessary. This can be a huge undertaking in a large condo complex. Sometimes following this procedure stirs up the unit owners enough to form a working condo association. It’s far easier dealing with one entity than multiple owners and the local jurisdiction should encourage the owners to follow the condominium declaration and form a viable association.
