Banks Starting to Walk Away on Foreclosures... (legal, companies, cost)
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So much for that contract between the lender and the homeowner...
Quote:
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 β from legal fees to maintenance β exceeds the diminishing value of the real estate.
Not sure what his has to do with relationship between lender and homeowner since the process of foreclosure ends that relationship. As for the overall problem:
...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.
Under these circumstances I think that a city or state should have every right to take possession of the property. I have long held that absentee property owners who do not actively protect their ownership rights within a reasonable amount of time should be held in default allowing for the state to claim the property.
That contract seems to be about as valid as contracts between companies and their people who run them. The government is largely to blame for both contracts going to hell.
I guess homeless people need a place to sleep, though.
How odd that a person can default on a home,have it damage their credit but the lender still refuses to accept the home and the local government holds you responsible for keeping the property up....
I believe the person in default is being held responsible....even though they defaulted on the loan.
That is what the article says but many people will say that the city has taken over ownership and the law says that the owner who didn't make the payments is responsible for destruction of the building when it has failed to be sold by the city at sheriff's auction. Those sales have to be held like maybe a week after the lender says they won't take over. The longer the house sits the more it will be abused by various kinds of people.
The linked article from NYT magazines goes into more detail. What's happening in Cleveland is very sad. I lived on one of the streets mentioned for a time as a child. The judge mentioned in the article is trying to force the banks to take care of and not abandon properties, but he's fighting a losing battle. The Tomasis are from California and are buying up properties by the thousands in Cleveland. As you can see from the clip, the housing industry might be heading for more trouble.
Clip:
The Tomasis said that they owned about 200 houses in Cleveland. (They purchased 2,000 homes last year, in 22 states.) They explained that they, unlike most other wholesalers, provide each buyer with the mechanicals β pipes, a boiler, a furnace, all the basic materials that had been stripped β that the purchaser would then be responsible for installing. Brancatelli derived some comfort from this description. From his background with a nonprofit housing group, he knew the theory that people who put sweat equity into a house will be more committed to its upkeep and to making the mortgage payments. The financing the Tomasis laid out, though, made Brancatelli squirm. The purchaser would pay $500 down and then make monthly payments of no more than $450, which was below local rental prices. But the interest rate was 10 or 11 percent. What most concerned Brancatelli was that the Tomasis eventually hope to package the mortgages and sell them to investors. http://www.nytimes.com/2009/03/08/ma...gewanted=print
Interesting, but I don't quite get it.
1) Why not renegotiate the loan with the owner who might not be able to pay current payments? Even 60-70% return is better then nothing.
2) If owner cannot pay, why not sell a $500K home for $250-300k? Isn't that better then nothing? I noticed a few times that if not sold at market value, banks hold back a long time (while the property deteriorates). Why not drop the price 40-50% for a quick sell? Even today there are people with cash interested in great deals.
3) Why use outside companies for those transactions? Real estate management companies are notoriously expensive. Banks can open in-house units to deal with foreclosed real estate. Not difficult in today's market and cheaper then using external companies.
Interestingly enough, banks will prefer to consider all these bad loans and lose all the money...
Last edited by oberon_1; 03-30-2009 at 03:41 PM..
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