Code Attorney

I recently met with an attorney who represents lenders to share information about our mutual concerns over properties that have been taken over by lenders.  She gave me some good tips for inspectors who are trying to navigate this confusing area.  She suggested that if you don’t have a contact with the lender begin with the Loss Mitigation Department.  She said that banks really don’t want to own real estate and try to work with mortgage holders to readjust mortgages.  She also said that it’s rare but sometimes a lender will ask the court for early possession if there are problems with the property that jeopardizes its interest.  It’s always wise to inform the lender if you have special concerns prior to the sheriff’s sale, e.g. water in the basement, mold growth.  Ultimately, getting results is all about maintaining relationships, that is, finding key people and developing ongoing relationships so you can be helpful to each other over time.

The Mortgage Bankers Association has updated its list of contacts and servicers for properties in foreclosure. You can find this very helpful information at http://www.mbaa.org/IndustryResources/ResourceCenters/PropertyPreservationResourceCenter.htm

There’s even a link which will let you search for information on a property by address:  https://www.mers-servicerid.org/sis/

Thanks to Kelly Anbach for continuing to pass on these tidbits to share with her fellow inspectors!

The other day one of the inspector’s I work with received a letter from a lender dismissively informing her that unless she provided proof via a recorded document that the bank had a connection with the property in question, it would basically ignore her notice of violation regarding code violations on the property.  (She had actually gotten the name of the lender from the law firm representing the bank!) I quickly researched the property on the county’s Recorder of Deeds website and discovered a document known as a lis pendens.  A lis pendens is a document filed by the bank with the local recorder’s office when it files a foreclosure lawsuit against the owner of the property who has a mortgage with the lender.  “Lis pendens” means simply that a lien is pending.  It notifies any potential buyers about the lawsuit.  As I expected, the name of the plaintiff in the lawsuit was the bank denying knowledge of a relationship between it and the property.  I sent the document on to the inspector who planned to compose a pointed letter to the lender.  It reminded me of how important this document can be.  It contains the full name of the lender (plaintiff) and all of the names of the owners and anyone having an interest in the property (defendants).  It contains the case number of the foreclosure suit so anyone can go to the local circuit court clerk and ask to see the file.  It also contains the name of the lawyers representing the lender which means that an inspector has the name, address and telephone number of a live human being he or she can call to get more information about a problem property.  Whenever you see a lis pendens in the chain a title, you know the property is in or has been in foreclosure so use that information to obtain as much information as you need to identify the responsible parties for the property.

In Victorville, CA a lender decided to tear down new homes and other structures that hadn’t been completed to avoid future fines from the local government for code violations.

Officials of Guaranty Bank of Austin, Texas, which took over the development last year, were unavailable for comment. But Victorville city spokeswoman Yvonne Hester said the bank decided not to throw good money after bad.

“It just didn’t pencil out for them,” she said. “They’d have to spend a lot of money to turn around and sell the houses. They just made a financial decision to just demolish them.”

You can read the entire story in the L.A. Times at this address

http://www.latimes.com/business/la-fi-demolish5-2009may05,0,4930126.story

Local governments frequently use fines as a way to motivate defendants to come into compliance with the code. Sometimes buildings have to be torn down if they’ve suffered too much damage from being open structures. But, this is the first time I’ve heard of tearing down brand new buildings as a way of coming into compliance with the local codes.

The Center for Public Integrity has released a report showing who the top 25 sub-prime lenders were and how they were financed by the very banks receiving bailout money.  If you’re wondering if the lender you’re dealing with is on the list, check out this article:

http://www.publicintegrity.org/investigations/economic_meltdown/articles/entry/1286/

It makes for pretty depressing reading.

The Wall Street Journal has an interesting story on “underwater” houses, those where the amount of the mortgage exceeds the value of the residence.  It estimates that 1 out of 3 homes now fit this category.  The article goes on to say that:

…borrowers who owe 30% more than their homes are worth are far more likely to walk away from their property than those who owe just 5% or 10% more and expect prices to rebound.

It’s important for local governments to consider the implications on the housing stock in their communities in light of this trend.  The article can be found at:

http://online.wsj.com/article/SB124156804522089735.html

If you want to find out what houses are owned by Fannie Mae in your jurisdiction, go to http://reosearch.fanniemae.com/reosearch/

Once again credit goes to Kelly Anbach, code enforcement officer extraordinaire, from Hinsdale, IL who discovered this website and passed the information on to me.

This article in the Wall Street Journal describes a scenario we’ve been seeing recently, owner occupied property in distant suburbs turning into rental neighborhoods.  It’s entitled, In the Exurbs, the American Dream is Up for Rent. http://online.wsj.com/article/SB123845433832571407.html

Local governments need to be ready for this change by adopting rental inspection programs that includes single family homes.  By making sure that minimum standards are met from the beginning of this changeover, cities and towns can take steps to make sure that these rental properties don’t have an adverse effect on the quality of life in those communities.