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Stopping foreclosure blight

Discussion in 'General Real Estate and Real Estate Finance' started by Smokey Bear, May 3, 2009.

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  1. Smokey Bear

    Smokey Bear Elite Member

    0
    Dec 8, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/03/MN1117BSR8.DTL&tsp=1 Interesting article -
    And I wonder if the lenders that foreclosed aren't violating some banking laws by letting their assets go to "waste", or losing value due to neglect. Are they taking monthly write downs or whatever on the loss of value due to their neglect?
     
  2. Lloyd Bonafide

    Lloyd Bonafide Senior Member

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    Jan 15, 2006
    Professional Status:
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    State:
    California
    Indio, CA is going further than fines - the police chief there is threatening to arrest bank CEOs if REOs are not properly maintained:


    http://abclocal.go.com/kabc/video?id=6792109


    http://online.wsj.com/article/SB124112509277274533.html

    Officials at a Citigroup Inc. office in St. Louis placed a call to this desert town recently. The bank had caught word that Indio was coming after the lending giant with fines and threats of criminal charges. The offense: an algae-infested swimming pool at 79760 Eagle Bend Court.

    Citigroup wound up in charge of the foreclosed home, one of thousands of such properties it was managing across the country. But last year, Indio passed a law that allowed it to charge banks with a criminal misdemeanor if they allowed a home to fall into disrepair.

    "If I need to do it, I'll say, 'Mr. Bank President, if you don't come and take care of your property, we're going to come arrest you and take you to court in California,'" says Brad Ramos, Indio's long-serving police chief.
     
    Last edited: May 3, 2009
  3. Randolph Kinney

    Randolph Kinney Elite Member
    Gold Supporting Member

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    Apr 7, 2005
    Professional Status:
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    I have read that banks are not proceeding with the foreclosure process even after issuing a notice of default because they don't want the cost of maintaining the property and recognizing the loss.

    It is a way to hide the truth about the asset. Sure, the asset is wasting away but the banks have better earnings. :new_smile-l:
     
  4. Smokey Bear

    Smokey Bear Elite Member

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    Dec 8, 2004
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    California
    I've seen that in Florida - massive numbers of homes where the lien has been filed but they don't foreclose.

    The Indio solution is fantastic!

    An idea - why don't these lenders rent the homes at $1 a month to employees just to have someone in the house to protect it? I know, the uncertainty of when you'd have to move out, but they could give moving bonuses when the house is sold or something.
     
  5. Randolph Kinney

    Randolph Kinney Elite Member
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    Apr 7, 2005
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    California
    I suspect the lenders do not want to set a precedence and have it get out of control.

    Can you imagine a TV film crew showing up for evictions? Is this really necessary? Why not just let the defaulted homeowner live there for $1 a month? What about market rent versus imputed income for the employee?

    Some investor is going to be cheesed too because you are destroying the rental market.
     
  6. Smokey Bear

    Smokey Bear Elite Member

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    Dec 8, 2004
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    California
    If the tenant is there as an employee of the company, different rules apply on evictions. In California, the eviction process doesn't apply.

    It's already destroyed!!! If there was a rental market, the properties would be selling to investors.
     
  7. Randolph Kinney

    Randolph Kinney Elite Member
    Gold Supporting Member

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    Apr 7, 2005
    Professional Status:
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    California
    From what I see where I am, investors are still buying. The problem is financing. Rents are softening. Home prices are still declining.

    As for areas like Indio, demand for rentals or owner occupied homes has collapsed because there isn't an employment base to sustain that level of housing. After all, who wants to live in Indio except someone who was born there, works there or retired years ago? :shrug:

    The employee tenant has taxable income based upon the market rent, what they should have paid versus the $1 a month they actually paid.
     
  8. Metamorphic

    Metamorphic Senior Member
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    Mar 15, 2008
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    I never understood why the banks didnt get into property management/landlording business in a big way 18 months ago.
     
  9. chad hampton

    chad hampton Senior Member

    17
    Nov 10, 2006
    Professional Status:
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    North Carolina
    Just another reason most of these bank ceo's should be arrested.

    I like the plan. The homes belong to the bank, if they don't want to sell them at today's market rate, or renegotiate the terms, then they should be forced to properly maintain them just like any other owner would be.

    Maybe that's what they should use all the billions they got from the taxpayer for, instead of using it to buy more bank stock - which does nothing for the average person.
     
  10. Mark K

    Mark K Senior Member

    12
    Jan 27, 2004
    Professional Status:
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    State:
    Indiana
    These are some of the reasons that many banks aren't in any hurry to foreclose. In Cleveland, Detroit, and other areas, the banks are just walking away leaving the mess up to the city and the borrower. I don't blame them when the market value is essentially $0 on many of these homes. Realistically, the value is negative.

    The banks should leave it in the borrower's name and let the cops go after the true deadbeats, the owners that walked away in the first place.
     
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