Bank 'walkaways' from foreclosed homes are a growing, troubling trend

[D-Mack]

Bank 'walkaways' from foreclosed homes are a growing, troubling trend
by Sandra Livingston/Plain Dealer Reporter
Saturday July 18, 2009, 11:05 PM

Renetta Atterberry thought she had lost her East 102nd Street house. So she was shocked to learn in January -- five years after her mortgage company filed for foreclosure -- that it was still in her name.

Worse, the long-vacant rental home had been vandalized and she faced a raft of housing code violations. Since then, she has been saddled with debts of about $12,000 to pay for demolition and back taxes.

"I thought I had nothing else to do with that home," said Atterberry. "I was so embarrassed and humiliated by this."

Her mortgage company didn't buy the house and never took it to sheriff's sale to see if somebody else would, leaving Atterberry the legal owner, responsible for upkeep and taxes.

These so-called "bank walkaways" are another troubling development in the foreclosure crisis, particularly in cities like Cleveland with weaker housing markets, say housing advocates and government officials.

Lenders or mortgage companies decide they don't want homes they have already foreclosed on, sometimes because the value has plummeted or they believe the homes could become costly liabilities if they are socked with housing code violations.

But without that sale, the property can languish abandoned and ripe for vandalism. As liens and liabilities mount -- creating a so-called "toxic title" -- it becomes even harder to transfer the property. Neighborhoods and local governments are left to deal with the mess.


"It's a growing issue. It's all over the state. It's not just Cleveland," said State Rep. Mike Foley. "That kind of lack of respect for communities that banks have made a ton of money off of in the past is infuriating."

...

more at

http://www.cleveland.com/news/index....oreclosed.html

Older article from March
Banks Starting to Walk Away on Foreclosures

[sn1p3r]

Re: Bank 'walkaways' from foreclosed homes are a growing, troubling trend

So just because a bank made money in the past they should be responsible? That was a weird statement at the end...just because you walk away from a house doesn't mean you are free and clear...she has responsibility as well.

[santafe2]

Re: Bank 'walkaways' from foreclosed homes are a growing, troubling trend

So just because a bank made money in the past they should be responsible? That was a weird statement at the end...just because you walk away from a house doesn't mean you are free and clear...she has responsibility as well.

I think we'd need more information before we can answer that question. If the creditor initiated foreclosure proceedings and had the home owner removed from the property they should also be required to take ownership of the property and maintain the property. If the home owner walked away they might be responsible. In the end, it's likely the city will have to take care of the problem and attempt to collect from the bank/home owner as best they can.

[sn1p3r]

Re: Bank 'walkaways' from foreclosed homes are a growing, troubling trend

Good point, it's not very clear. The better question is would she have been better off if she had bought this vacation home through a trust/llc arrangement so that the financial liability could have been left with a now bankrupt entity?

[illuman23]

Re: Bank 'walkaways' from foreclosed homes are a growing, troubling trend

Good point, it's not very clear. The better question is would she have been better off if she had bought this vacation home through a trust/llc arrangement so that the financial liability could have been left with a now bankrupt entity?

Residential mortgage lenders (under Fannie & Freddie rules) don't lend to Trusts or Entities, only real people. The mortgage is most likely in the owners name, and no amount of grant deeds to an entity would remove that personal liability. Unfortunately for Ms. Atterberry, she's going to need to hire legal council, and most likely file a bankruptcy in order to protect whatever assets she may have accumulated since the foreclosure (or I guess the non-foreclosure). I'm no expert in Ohio Foreclosures, but the lender would have had to at least file something in the courts to get the process started. There aren't non-judicial foreclosures in Ohio. Unless Ms. Atterberry was convinced to leave her home by the collections department, and the mortgage never went to loss mitigation this kind of thing shouldn't be happening. Anyone hear of this kind of thing in a Non-Judicial foreclosure state (like California?)

[swgprop]

Re: Bank 'walkaways' from foreclosed homes are a growing, troubling trend

Residential mortgage lenders (under Fannie & Freddie rules) don't lend to Trusts or Entities, only real people. The mortgage is most likely in the owners name, and no amount of grant deeds to an entity would remove that personal liability. Unfortunately for Ms. Atterberry, she's going to need to hire legal council, and most likely file a bankruptcy in order to protect whatever assets she may have accumulated since the foreclosure (or I guess the non-foreclosure). I'm no expert in Ohio Foreclosures, but the lender would have had to at least file something in the courts to get the process started. There aren't non-judicial foreclosures in Ohio. Unless Ms. Atterberry was convinced to leave her home by the collections department, and the mortgage never went to loss mitigation this kind of thing shouldn't be happening. Anyone hear of this kind of thing in a Non-Judicial foreclosure state (like California?)

It happens frequently that junior lienholders may start a foreclosure only to cancel it upon determining lack of equity, but that leaves the senior to foreclose. I also recall anecdotal accounts of lenders halting foreclosure proceedings when they found environmental issues with the property. (EPA Superfund site, etc.)

As to the trust/LLC issue, once can always transfer title to this type of structure subsequent to closing. I wonder if that would offer protection from fine levying authorities.

[sn1p3r]

Re: Bank 'walkaways' from foreclosed homes are a growing, troubling trend

I'm not sure if it would offer direct protection but I guess you could bankrupt the entity without fear of losing assets owned by other entities (i'm not expert just guessing here)

[Beavus]

Re: Bank 'walkaways' from foreclosed homes are a growing, troubling trend

I also recall anecdotal accounts of lenders halting foreclosure proceedings when they found environmental issues with the property. (EPA Superfund site, etc.)

So if you have a toxic spill on your property of some substance, how do you legally notify your mortgage company so that they would choose "walk away" yet have the environmental issue be minor enough to not cause danger to the family living in the home?

Are overflowing septic tanks considered toxic spills?

[CanuckinTX]

Re: Bank 'walkaways' from foreclosed homes are a growing, troubling trend

So if you have a toxic spill on your property of some substance, how do you legally notify your mortgage company so that they would choose "walk away" yet have the environmental issue be minor enough to not cause danger to the family living in the home?

Are overflowing septic tanks considered toxic spills?

My wife would say yes!

[swgprop]

Re: Bank 'walkaways' from foreclosed homes are a growing, troubling trend

So if you have a toxic spill on your property of some substance, how do you legally notify your mortgage company so that they would choose "walk away" yet have the environmental issue be minor enough to not cause danger to the family living in the home?

I'd place a couple of signs in the front yard..




Then stop making payments. When they send someone out to do a property inspection answer the door like this:



That should scare'em off