In an article today in the Milwaukee Journal Sentinel, it was reported that it’s becoming commonplace for lenders to refuse to take title to some properties following foreclosure. Why would a bank bother to foreclose and then abandon the property? It’s simple economics. Many of the homes just aren’t worth the bank’s efforts. But then, why would they foreclose? And who ultimately owns such properties? The answers are often as confusing an illogical as the creation of the subprime collapse that precipitated the problem.
What’s happening is a crime—perhaps not legally, but figuratively. Sometimes it’s a crime against the very people who have already suffered the most; and other times it’s a crime against neighborhoods trying to recover from issues of high crime and drug dealing. In the words of Catherine Doyle, attorney with the Milwaukee Legal Aid Society, “This is just the meanest and nastiest thing (lenders) could do. Even more profound is the terrible damage to the community.”
Abandoned homes become a blight on neighborhoods, havens for drug and criminal activity, and create fire and safety hazards. No longer sources of tax revenue, such homes are a drain on struggling cities resources, and ultimately cost taxpayers thousands more when condemned and bulldozed.
The procedure, known in the trade as “walkaways,” is a growing problem, especially for cities, where most are pressed for revenue. The mortgages on these homes, the great majority of which are subprime, were often made by now-defunct mortgage brokers, and are being foreclosed upon by loan servicers on behalf of investor groups often thousands of miles away. And, unfortunately, there appears to be no solution to the problem.
Have banks lost their hearts, or is it they never had one? The image of the friendly neighborhood banker was perhaps always a utopian vision; but what they’re doing is egregious on a monumental scale. Throwing people out of their homes, only to have those homes bulldozed later, is not only inhumane, it’s sheer stupidity. Once the owner is forced out, the home falls in to disrepair, may be vandalized, and everyone loses. And, the irony is; when the bank walks away, the original owner is still on the hook for taxes, boarding-up and clean-up fees that can run into the thousands of dollars. It’s a game of no winners.
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There just has to be a better solution. While I understand the banks' concerns over the precedent of forgiving loans or portions of loans, they lose more in the end. I can't help but believe there's a way to evaluate each case and make adjustments. But then . . . I'm on the outside looking in.