Dysfunctional Economy ?
Let's not exaggerate !
It's might just be that they just don't know what they are doing!
But rest assured; our good government will always be there to get these behemoth of "financial institutions" out of any trouble.
Don't you understand that they are just Too Big to Fail?
Your money and mine are the best guarantee that Banks will (almost) always prevail.
Read this article and have some good honest fun:
Banks Halting Foreclosures to Avoid Upkeep
Banks
are walking away from thousands of vacant properties after starting and
then refusing to complete the foreclosure process because they do not
want to pay for maintaining the homes.
The
result: hundreds of thousands of homes are being withheld from the
market, raising questions about whether the recent run-up in housing
prices is artificial.
Meanwhile,
former homeowners that have already left the property with the belief
they lost the home to foreclosure are ending up on the hook for the
unpaid debt, taxes and repairs.
Consumer
advocates say the largest mortgage servicers are blatantly ignoring
Federal Reserve guidance that require borrowers be notified if a
foreclosure is initiated and then abandoned. They also are raising
fair-lending concerns because abandoned foreclosures are more prevalent
in low-income and minority neighborhoods.
"We're
seeing more and more, banks getting a judgment to sell a home but not
taking it to a foreclosure sale," says Thomas Fitzpatrick, an economist
in the community development department at the Federal Reserve Bank of
Cleveland. "Banks speak more openly about how if it's not in their
economic interest to foreclose, they're not going to foreclose. It may
cost more to cure the back taxes and bring the property up to code than
they could ever get from selling the property itself."
Fitzpatrick is helping draft what he calls an "overlay" law that would bring uniformity to the state foreclosure process and
would require servicers to speed foreclosures of vacant and abandoned
properties. The law, which is being worked on by a committee of the
Uniform Law Commission, a non-profit group of judges, lawyers and state
legislators, will be finalized in July 2014 and would still have to be
passed by each state legislature.
"It's
a regulatory gap, or crack in the process," says Judith Fox, an
associate clinical professor at Notre Dame Law School, who is
researching abandoned foreclosures.
Bank
"walkaways" used to be extremely rare, but they have ballooned in the
past year or so, resulting in a large number of homes stuck in
foreclosure, sometimes for years.
More
than 300,000, or 35%, of the roughly 1 million homes currently in the
process of foreclosure are vacant and the servicer has not taken title
to the home, according to new data from RealtyTrac, the Irvine, Calif.,
data firm. In 2010, the Government Accountability Office estimated the
number of abandoned foreclosures to be between 14,500 to 34,600 homes.
"We
call them zombie foreclosures," says Daren Blomquist, vice president at
RealtyTrac, which estimated with the number of abandoned foreclosures
by cross-referencing addresses of homes in the foreclosure process in
the first quarter with vacant property data from the U.S. Postal
Service.
The GAO used different methodology in
its 2010 report. But the GAO report also found that "because abandoned
foreclosures do not necessarily violate any federal banking laws,
supervisors did not take any actions against the institutions."
Last year, the Federal Reserve issued guidance requiring that servicers notify borrowers and municipalities when they choose not to pursue a foreclosure.
"Banking
organizations should use all means possible to provide notification,"
the Federal Reserve stated, adding that banks "should employ the same
extensive methods they use to contact borrowers in connection with
payment collection activities."
Prompt
disclosures would inform borrowers of their right to occupy the
property until a sale or title transfer, while reminding borrowers of
their financial obligations to pay the outstanding mortgage, taxes,
insurance and repairs.
The
Office of the Comptroller of the Currency issued similar guidance in
2011, noting that banks and servicers "should consider the potential for
reputation and litigation risk," of abandoned homes.
But
consumer advocates say servicers generally are not complying with the
disclosure requirements because there is no specific time frame for
doing so. The national mortgage settlement includes an anti-blight
provision requiring that servicers either release the lien on a property
or complete a foreclosure sale, but that rule sets no specific time
limit either.
"Disclosures
are not happening on the ground," says Peter Skillern, the executive
director of the Community Reinvestment Association of North Carolina.
"The question is whether banks are following the guidelines and if
federal regulators continue to sanction this practice of abandoned
foreclosures."
Many
cities have ordinances that require maintenance of abandoned homes. But
if a servicer has not taken title to the property, cities instead end
up tracking down the former homeowner to pay for liens, upkeep and
taxes. These former homeowners could also be on the hook for overdue
homeowner association fees, past-due insurance and the mortgage debt.
"We
believe bank walkaways are an increasing problem that needs to be
addressed by regulators," says Skillern. "In some cases the servicer has
simply lost the paperwork and can't keep up with where they're at in
the foreclosure process."
Amy
Bonitatibus, a spokeswoman for JPMorgan Chase (JPM), says there are
many reasons why a servicer would not take title to a property and
complete a foreclosure.
"If
it's going to cost us $30,000 to foreclose and the unpaid balance on
the loan is $30,000 and current market value is not much higher, we
might release the lien and give the home back to the borrower."
But Skillern and other consumer advocates say servicers rarely do so.
"No
bank just forgives the debt," he says. "Part of why you see an increase
in abandoned foreclosures is because it's an accretive problem. Our
research shows that homes that banks walked away from in 2008 are still
sitting there."
He
described a borrower who moved out of her home six years ago after
receiving a foreclosure notice, and now the servicer that failed to
complete the foreclosure is trying to collect six years of past mortgage
payments, taxes and repairs.
Housing
experts speculate that banks are purposely refusing to take title of
abandoned foreclosures as a strategic move to better manage their
ballooning portfolios of real-estate owned or REO properties. If more
properties were put on the market, it might dampen the nascent housing
recovery, the thinking goes.
"I
have long been convinced that the current run up in home prices is a
false high," says Ruhi Maker, a senior staff attorney at the nonprofit
Empire Justice Center in Rochester, N.Y. "Once all these foreclosures
are through the system we could see another decline in prices."
James
Kowalski, executive director of Jacksonville Area Legal Aid, says he
has clients who have tried for years to get their servicers to foreclose
and take title to their homes.
"There
are literally thousands of borrowers who have been trying to hand the
house back to the bank and they won't take it back," Kowalski says.
"They can decide not to file, to rescind a notice of default, or to ask
for continuances, and they're doing it repeatedly in Florida. If you
want any better proof that the banks are slowing down the process
state-by-state, based on their own internal analysis, this is it. The
banks control the pacing of the foreclosure process, not the homeowners,
not the judges."
Nonprofit
housing groups have already filed complaints in the past year alleging
that several servicers including Bank of America (BAC), U.S. Bancorp
(USB) and Wells Fargo (WFC) violated fair-housing laws by
failing to appropriately maintain and market foreclosed properties in
minority neighborhoods. The Department of Housing and Urban Development
is still investigating.
Fox,
at Notre Dame, says failing to foreclose is having a "disparate impact"
on low-income and minority communities, contributing to blight.
"I
call it redlining because the servicer starts the foreclosure, they
give notice to the borrower who moves out, but then when the servicer
sends someone to look at the house and sees the neighborhood, they
realize it's not in their economic interest so they stop the
foreclosure," Fox says.
Still,
the "disparate impact" theory of discrimination allows for exceptions
if there is a business justification, and servicers are likely to cite
the cost of foreclosure exceeding the expected proceeds a sale of the
property as the reason abandoned foreclosures are more prevalent in
areas with low-value homes, says Fitzpatrick at the Cleveland Fed.
"Lenders
will almost never know the race or ethnicity of the owner," says
Fitzpatrick. "It simply costs them more to take the property than not
to."
Alan
White, a law professor at City University of New York Law School, says
it is "conceivable" to make a fair-lending case if servicers have
specific practices that are tying up otherwise available properties in
minority neighborhoods.
"We
can see an effect on neighborhoods but is there an actual policy or
decision made by servicers not to foreclose on a uniform basis?" White
asked. "If a lender had a policy stating they will not proceed to a
foreclosure sale on a property of less than $50,000, then it's a policy
that has a discriminatory impact.
But if there's no policy or practice,
you can't really bring a legal challenge and servicers can assert a
business justification."
by Kate Berry
American Banker
APR 23, 2013 2:04pm ET
