Banks Walking Away From Foreclosures

Mar 31st, 2009 @ 9:40 AM by Alden Smith

An interesting development in the mortgage market is banks that are starting to walk away from foreclosures.  In an article in the New York Times, reporter Susan Saulny tells of a situation in South Bend Indiana.  A homeowner had received notice that she had lost her rental property to foreclosure.  A date for a sheriff’s sale had been set.

The landlord had the tenants move out of the rental property.  The property stood empty and was damaged by looters and vandals, soon falling into disrepair.

Not long after, the landlord received a notice from the city of South Bend demanding that she take over maintenance once again on the property.  Apparently, the sheriff sale had been canceled at the last minute.  The property title was still in the landlord’s name.  The house, which had been severely vandalized, was no longer of any value.  The city plans on demolishing it.  The landlord will be charged for demolishing the home.

According to the New York Times, this is happening across the nation.  Banks are declining to take possession of property at the end of the foreclosure process.  Their reasoning is that legal fees and maintenance are higher than the value of the property.

This is seen as detrimental to the communities where it is happening.  Although the homes are valued at the lower end of the market, what is happening is these homes are sitting in neighborhoods, boarded up and uncared for, causing considerable blight to the community.

Is this, like the shantytowns springing up all over the country, another sign of moral and social decay in our nation?  You have to question whether things have gotten so bad that banks are foreclosing on property and then refusing to take responsibility for it.  The name of the game should be in foreclosure that the bank takes back the home, makes every attempt to recoup their losses, and then sells the home at a sheriff’s sale.  Instead, we see banks refusing to take responsibility for this action.  Soon, we will see neighborhoods falling into disrepair and decay.  They will become a nesting place for everything from drug dealers to homeless people.

I believe it is time to send a clear message to the government, and ensure that this new development goes no further.  It’s fine for the banks to take care of business.  It’s not fine, however, to allow this to happen.