In some places, real estate has become so toxic that not only are homeowners walking out on their mortgages, the banks are walking away too.
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.”
Joseph Schilling, associate director of the Metropolitan Institute at Virginia Tech and an expert on abandoned property, said the issue of bank walkaways is increasing. Lenders may decide that given low prices and their mounting inventory of foreclosed property, it makes sense to walk away…
Cuyahoga County saw more than 14,000 foreclosure filings both in 2007 and in 2008. In 2007 there were nearly 10,000 sheriff’s sales, but the number dropped in 2008 to about 8,000.
Lenders or mortgage service companies may decide not to seek a sheriff’s sale because they’re working to restructure a mortgage or the homeowner has gone into bankruptcy. But there’s no doubt they’ve also walked away from homes when it’s in their financial interest to do so.
“In the old days when values were much higher, it made a lot more sense to press the foreclosure sale,” said Dave Sarver, whose Cleveland Heights-based Sarver Realty specialises in selling properties taken back by banks at sheriff’s sales.
But now, he says, when a growing number of properties are worth only a few thousand dollars, it doesn’t make sense for mortgage companies to take title to properties with little value and the potential for costly city code violations.
In Cuyahoga County, foreclosed homes that lenders or mortgage companies bought at sheriff’s sales have recently sold for as little as 30 per cent of the home’s previously appraised value, according to the centre on Urban Poverty and Community Development.
In the city of Cleveland the numbers are even worse — with lenders selling foreclosed homes for just 15 per cent of their former value.
The Plain Dealer has a lot more, so go read the entire, frightening thing.
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