There are times when foreclosures make sense. It can get an underwater borrower out of a difficult economic situation; it can readjust the market price of a property so that it can be purchased by someone who can afford it. I have to question the sense of this scenario though:
In western New York, the city of Buffalo filed a lawsuit on Feb. 21 against 36 lenders — including big names like JPMorgan Chase and Countrywide Financial Countrywide Corp who were involved in 57 foreclosures that led to properties being abandoned and ultimately demolished by authorities.
The struggling Rust Belt city, plagued by about 10,000 vacant homes and commercial buildings, estimated the 57 foreclosures cost Buffalo $1 million in demolition work and another $1 million in nuisance costs — from police patrols to boarding up buildings, to the social toll on communities.
"We have found homicide victims in these structures," Buffalo Mayor Byron Brown said in a telephone interview.
"Dog fighting has taken place in these structures. Drug dealing has been conducted. Last year one of our fire fighters was critically injured, losing one of his legs from the knee down, fighting a fire at a vacant structure," he said.
Alisa Lukasiewicz, who runs the city’s law department, said Buffalo drew inspiration from similar lawsuits in Cleveland and Baltimore. "These properties are in a state of legal limbo," she said. "Banks walk away. The homeowners are gone, and the property is still there."
For a bank to take a property back and resell it makes sense to me- to take it back and abandon it doesn’t. Lenders should be held responsible for these properties and their impact on the communities they are in. If lenders can’t or won’t take care of these properties, it makes no sense for them to foreclose on them. If homes have been abandoned by their former owners, it is still the responsibility of the lenders to maintain and/or demolish these properties. It’s what we expect of homeowners- to not hurt the value of their neighbors- no matter who the "homeowner" happens to be.
Why would the bank want to lose any more on the property than they already have? They want a quick buck and streams of revenue.
They are not bright enough to know that the properties will be worth a mint someday.
What happened to all those contractors who wanted to buy junk houses?
Of course the lenders are walking away.
Uncle Ben is buying all their bad mortgages AT FULL PRICE.
With the bailout underway, why should lenders invest any more time, energy or money? Just walk away! It’s the taxpayers’ problem now.
This is so unamerican.
Shouldn’t the local government (i) be levying the assets of the bank to collect the property taxes, and (ii) be enforcing building code, zoning and other ordinances against these banks? I’m sure if I owned a structure that was visibly violating various local codes, and cost the city a lot of money, I would be summoned to court! Threatened with fines and perhaps even prison!
The fact that this is allowed to happen is an example of what America is becoming.
If an ordinary citizen doesn’t pay his overwhelming taxes on time, or comply with local codes to the letter, the full weight and authority of the government are hammered down upon him, seizing his assets first maybe to be recovered at trial (which he can’t pay for since the government has frozen his bank accounts), but if you’re a big campaign contributing bank, or other well represented local industry like the entertainment biz here in L.A., well then, it’s just a polite lamentation that it would be nice if those properties were kept up to code.
Welcome to the new America. Welfare for large corporate interests, spite for the middle class.
Igor’s word: newboss.
I don’t see any good solution to this. Can the banks really afford to hire a nationwide staff of people to maintain homes (because they certainly wont sell them all anytime soon)? Demolishing would be the cheap way to go - but how many neighborhoods will there be that have empty, trashed-filled lots on every block?
Ok, yeah, so the answer to the first question is the same as any company - yes, they can afford it, but the executives are too busy embezzling money in the form of bonuses.
A consistent pattern of responsible behavior usually leads to prosperity. It is also true that irrisponsible behavior leads to devastation. The main difference between the two is the pain.
Do you choose to feel the pain of discipline? It will require you to PLAN, to not be impulsive, and to live below your means TODAY in order to have prosperity TOMORROW.
Or do you choose the pain of regret? It will allow you to live above your means, reap all the benifits of quick profit, then leave you with the mess after the good times are over.
This is essentially what this article points to. People bought houses they could not afford because they WANTED to. Lenders gladly forked over the money because it looked good on the books, and allowed the CEOs to get bigger bonuses. Now, folks have lost their homes and banks are getting bailed out. These properties have become a burden upon law enforcement, with financal responsibility shifted to the taxpayer.
We are feeling the pain of regret.
Jim is right. The fact that this is allowed to happen is an example of our path. And in light of the evidence, are we willing to change and choose the pain of discipline to correct the problem? Heaven’s no! Let’s postpone that as long as possible, until we can figure out another way to ‘avoid’ the pain of regret. It just makes it worse.
A consistent pattern of responsible behavior usually leads to prosperity. It is also true that irrisponsible behavior leads to devastation. The main difference between the two is the pain.
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http://en.wikipedia.org/wiki/The_Protestant_Ethic_and_the_Spirit_of_Capitalism
It would seem we have lost our way.
It’s actually pretty simple math… Let’s say you want me to buy a house and let’s say I already have a house.
Well now that’s a pickle… So many rust belt cities have more homes than they have qualified people to buy them.. So what exactly is the 11th home in a city of 10 families worth?
Well let’s assume that everyone trades Up over time and the 11th house is the least desirable.
So now we need to value that gem? Well now a home with zero mortgage costs a whole bunch of money.. Taxes, Insurance, Maintenance, liabilities out the yin yang…
So how much would you pay me to buy this house?
I don’t see any good solution to this. Can the banks really afford to hire a nationwide staff of people to maintain homes (because they certainly wont sell them all anytime soon)?
I see a GREAT solution: LOWER THE PRICES AND THEY WILL SELL!
Prices have tripled since I looked last. This could be coming to a town near you.
http://tinyurl.com/3eytb5
KL-
Good grief.
I couldn’t believe how many homes were for sale at less than $1/sq. ft.- and you can get a palace for around $50/sq. ft.
Obviously the banks can’t give these things away. This is a piece that people often forget- it doesn’t just take a low price to bring up demand. Detroit is hurting because of the lack of jobs and a declining population- it caused a housing surplus as bad as any bubble could.
If the economy of bubble areas gets hammered, which certainly is looking possible, the downward spiral will continue- and no mortgage bailout plan will fix it.
@NVMike
Will they? If we are indeed overbuilt on housing, then no, they won’t sell. In some areas, I believe there’s simply not enough buyers. What you’re saying amounts to “If you build it, they will come”.. but you need to have enough jobs in the area to support the population.