NY Times: Now The Banks Are Skipping Foreclosures
By Susie Madrak Monday Mar 30, 2009 12:00pmJust when you thought it couldn't get any worse, it does. But hey, isn't it great that lobbyists have managed to prevent Congress from letting bankruptcy judges lower mortgage payments? Win-win!
SOUTH BEND, Ind. — Mercy James thought she had lost her rental property here to foreclosure. A date for a sheriff’s sale had been set, and notices about the foreclosure process were piling up in her mailbox.
After Ms. James had her tenants move out, vandals hit the home. It is set for demolition, but the title is still in her name.
Ms. James had the tenants move out, and soon her white house at the corner of Thomas and Maple Streets fell into the hands of looters and vandals, and then, into disrepair. Dejected and broke, Ms. James said she salvaged but a lesson from her loss.
So imagine her surprise when the City of South Bend contacted her recently, demanding that she resume maintenance on the property. The sheriff’s sale had been canceled at the last minute, leaving the property title — and a world of trouble — in her name.
“I thought, ‘What kind of game is this?’ ” Ms. James, 41, said while picking at trash at the house, now so worthless the city plans to demolish it — another bill for which she will be liable.
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 — from legal fees to maintenance — exceeds the diminishing value of the real estate.
The so-called bank walkaways rarely mean relief for the property owners, caught unaware months after the fact, and often mean additional financial burdens and bureaucratic headaches. Technically, they still owe on the mortgage, but as a practicality, 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.
“It is what some of us think is the next wave of the crisis,” said Kermit Lind, a clinical professor at the Cleveland-Marshall College of Law and an expert on foreclosure law.
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that broke the camels back.
People will start taking action if this shit keeps up.
The banks have already proved they're untouchable. They're going to keep pushing and pushing on this stuff as long as they can. Just wait and see, it's going to get much worse.
Maybe by DC...not by an angry mob
If the bank is just going to walk away from it after going through the foreclosure process, why not instead either give a 1 year reprieve to the borrower or just hand over the note? I don't see the business motive in walking away after foreclosure.
If the bank walks away, who owns it?
It does seem stupid for no one to live in the home and just let it sit abandoned, bringing down neighboring property values.
I like the idea of some sort of "reprieve". Maybe let the resident pay "rent" for a year at a dramatically reduced rate. At least the house will be kept up, the lawn gets mowed, etc. The resident keeps a roof over their head and the bank doesn't lose 100% of their investment,
Just walking away from a home when you could get SOMETHING for it, it just plain stupid.
To add to this, the article states that some of the mortgage guys have gone under, further adding to the problem. I'm certainly no expert, but I thought bankruptcy law could be used in situations like that of these struggling mortgage brokers to protect themselves from creditors while still allowing them to collect from those who were indebted to the company in bankruptcy.
In other words, at least some capital would still be flowing, albeit a reduced amount.
The main problem is, the banks cannot find who actually owns the mortgages. From what I understand, 1 mortgage could be broken up and sold to several different investors. Then, said investors own 10% or so of the mortgage. How can the bankers find all 10 investors of the original mortgage, find a legal way to get back the original bank's legal claim on that mortgage and then sue the buyers in default? It's becoming a legal nightmare for all involved. I just wonder what happens if somebody actually pays off their mortgage. How do they get a real deed when this has happened? This whole mess is just STUPID! Anyone with a lick of sense could have seen this coming like a train wreck waiting to happen. And yet, they are STILL getting paid millions yearly for this clusterfuck!
That is not my understanding of the law.
The revenue stream on the note can be divided, repackaged, etc. The mortgage itself can be assigned but cannot belong to multiple owners. The bank could never have pursued foreclosure in the first place without demonstrating that it had a valid mortgage, so it would have nothing from which to walk away. (Some courts, though, are admittedly more diligent than others about reviewing the transfer histories filed by the bank if the borrower's counsel doesn't raise the issue.)
My real concern is that, as I understand it, the lien remains valid even if the bank never takes further action to collect payments on the note. That means that the bank could possibly pursue foreclosure again ten years later if the neighborhood has changed or a new owner has put a lot of work into fixing it up. I'm not sure if the borrower has any way to void the lien even if the bank walks away.
Beautiful...just beautiful.
Keep taking it up the ass America.
You say that like it's a bad thing.
Strap-on's RULE!!!
Yeah, and I guess they were'nt wearing any condoms either. Sheeshe, this just keeps going from really bad to a nightmare in hell!
Close, but not quite:
Here in Dallas various businesses were encouraged the city government to open shop in more economically depressed areas.
Then prostitutes and drug pushers started plying their trade right in front of the stores.
The stores repeatedly call police out to arrest these people.
Then the police turn around and fine the owners for failing to control their property.
Often because there's someone on city government who's trolling for a bribe, or want the property for a friend or aquaintance to open shop on.
What happened to "Possession is three points of the law?' If the ownwer has the property and the bank walks away, shouldn't the owner then be able to retain ownwership free and clear?
I thought, too. Break the locks and move back in.
is still class warfare. and the shape of this disaster mimics that shape from its beginnings, as do all the tributaries feeding it today, swelling its velocity and increasing the damage. such as this one.
until it bursts forth in a spasming river of foam and pleasure.
I love when you talk dirty.
If the bank walks away from foreclosure, they are saying they don't want the property. I say at that point, boom, she owns it free and clear. Let the bank be the ones to deal with the fallout from whatever multi-national, Cayman-Islands-based holding company has the associated derivative in their hands.
Freed of the mortgage payments, with any luck, the owner would be able to do just what the city is asking: invest in the property and make it a revenue-generating entity for herself and the city once again. Everyone wins who should win.
British common law is dead.
We're in the American model now. Make the shit up as you go along, until you bring the law in line with what the corporate masters want.
Good analogy!
That's about the size of it.
If the bank walks away from foreclosure, they are saying they don't want the property. I say at that point, boom, she owns it free and clear. Let the bank be the ones to deal with the fallout from whatever multi-national, Cayman-Islands-based holding company has the associated derivative in their hands
But thats not the law and there is no court which would so hold. And Congress isn't about to make a law allowing this to happen
Congress isn't about to make a law until someone takes a bank to court.
Then the law will be written to rectify the unfortunate oppression of financial institutions by widows and orphans.
enact a homestead act where anyone that is homeless could walk in and maintain the property, pay the taxes and everyone wins, "except the banks" who already gave up interest in the property.
Give property away?!?! In America?!?!
You COMMUNIST!!!
Isn't that the way they setteld the west in the first place? Look at what it could do for the real estate market. It would stabelize the market because the homesteader would not have an appraisal to devalue the other properties around it. Brilliant!
Not that I don't see some merit in squatter's rights, but I would give the original owners precedence. The suggestion above would lead to a whole new category of ambulance-chaser-like vultures who invade and squat upon foreclosure, and lock out the original owner who may or may not worthy of a second chance.
If the bank starts foreclosure but doesn't complete it, the homeowner still owns the property (but is still subject to the mortgage - the bank could go forward with the foreclosure or restart it at any time). The failure of the bank to go forward does not, in any state, mean that the property is owned free and clear by the homeowner. If the foreclosure is completed by the occurrence of the foreclosure sale, the high bidder owns it (almost always the bank).
Should just stay in the house until the "new" owner is ready to move in. If the high bidder is the bank, then the bank would be stuck with continued maintenance of the property.
The high bidder is generally the bank. I believe that these are cases where the bank doesn't actually bid on the property at the sheriff's sale, so not only is the bank not the high bidder, but there are no bidders at all.
If there is a bidder, the law is pretty clear: the bidder gets the title, gets the house, and is responsible for the maintenance. The real injustice this article observes--the dispossessed being assessed for maintenance of homes they've been expelled from--doesn't generally happen. Of course, that it happens at all is ridiculous, and that it's happening with increasing frequency (even if nowhere near a majority of the time) is what made it newsworthy.
If she is legally in foreclosure, her credit is already ruined. If I were her, I would just ignore the added costs and let them build up. What is the bank going to do, sue her? That will be costly for them too. Of course if I were really her, I would have a real estate attorney working for me.
Generally, government liens come before everything else, and often cannot be extinguished. Consequently, letting the home fall into disrepair won't work.
If she hadn't let the house go, she could've continued to rent it out. Indeed, she could do so now, theoretically, if it wasn't for the bulldozer coming.
I understand why she didn't, but she could have cut the rent in half, asked for cash, and simply put it in the pocket. If the bank's not going to take ownership, forget them.
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.
Is this even remotely plausible? Is the suggestion that banks refuse to keep records? Or share them with authorities? And who is it that "thinks" these properties are in foreclosure?
Watching property/housing values going higher and higher over past thirty years it was plain to see the disconnect between what average range was for wages and what the realtors,bankers and house building industry were saying property/housing were worth was very unlinked.
In this part of the United States old houses sell for new house prices and despite this craziness it still is nothing compared to what Florida,California and New York City saw.Houses being given values in the $300 hundred thousand range with many jobs not paying even $12-$15 an hour was going to work how again?
Now to read the bankers/mortgage holders are "walking away" from this growing implosion of the supposed "market values" because they were/are so out of any known reality zone does not surprise.
Aaron Spellings "home" in Hollywood is on the market for $150 million.
This monster has over 55,000 square feet in it. Parking for 100 cars.
Who needed this kind of excess? Aaron Spelling evidently.
The realestate game over past thirty years went all funny money and now we see it isn't going to be very funny unwinding the fraud,grifter mentality and fast buck paperhanging.
In theory if this whole pile of excrement just kept going up with the flippers and speculators always seeing gains where was it going to come out at? Where?
All on a economy where finding $10 an hour jobs is getting hard to do?
It all has the look of the Hindenburg disaster. How could it happen?
Easy. Lots of explosive gas. Now run! Run fast! Get out from under it!
I like to refer to our economic slowdown as "Death Spiral".
is even better.
That's all I can say, and I'm barely informed!
market stops rumbling and then erupts.
They're doing it ass backwards. Pay down the principle on the loans for the mortgage holders that are in trouble, into a range of realistically sized payments.
There was a story on the news today wherein people are renting properties they can't sell, for $1700, and their mortgage is $3000.
To do it the bankers' way (Heads, we win, tails, you lose), you end up with loads of homeless people and a glut of vacant homes and properties, open to squatters and vandals, all ending up as worthless.
This is more than fucked up.
to drop.
and it will be a wingtip.
to house people. Turned into Villages. Government subsidized.
Village of the Damned would be a great name for the chain-taxpayer funded franchise.
who owns these houses? Wish my bank would walk away from my mortgage.
of mortgage-backed securities traders own a piece of your house.
Or think they do.
same boat. The U.S.S. Titanic
Does this mean that she would have been better off just letting the tenants stay or move into the place herself? What exactly is the message... don't leave the property unless they take you away in handcuffs? Why bother paying the mortgage if there is no mortgage company left to claim the property? What happens to the deed?
Many of these homes are in low income neighborhoods. With this type of scenario we are going to end up with decaying neighborhoods that will never see improvement. One house can be torn down in part of a neighborhood but an entire section of a city?
... why we should consider that an impossibility?
In fact, a few Rust Belt cities already have "shrinking cities" urban visions in place, in which large blocks of decrepit and unnecessary (because of the reduced population) housing stock are being converted to greenspace and other lower-maintenance uses that pose fewer health and safety hazards.
Maybe instead of voting for Bush and the Republicans at the last few elections (just a guess on my part), she should have be readint "What's the matter with Kansas" by Thomas Franks.
You're kidding right? I mean, it's going to get a whole hell of alot worse. We've never seen anything like this before. Not I, my parents, or their parents. I was born in 63.
In their most deliriously greedy dreams, where did these idiot bankers imagine this shitpile of transactions were going to take them?
This situation is particularly agregious when you consider how many people are homeless.
WE NEED SQUATTING LAWS LIKE THEY HAVE IN NEW ZEALAND: If a builing is abandoned for two years ANYONE can move in and own it if the improve the property.
I don't know about worse, but the going is definitely getting weirder. The take-away from this for me is that if you are in foreclosure, you should fight tooth and nail until the last possible instant, and if possible, figure out a way to be a bidder in the sheriff's sale. You just might prevail -- either owning the house outright, or at least owning it de facto.
These banks are like five-year olds fighting over toys - they grasp and grab until the whole thing is broken, and then go "I don't want it now".
Did their parents never go "You broke it because you were roughhousing. If you want another one you have to earn the money to replace it."?
So much of this mess has been caused by people that look like adult homo sapiens, dress themselves without a nurse, and seem to be able to use simple tools, but somehow managed to never get trained in the basic lessons of how you live in a society.
What the fuck do you *do* with people like this?
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