In what some industry experts think may be the next wave of the foreclosure crisis, banks are refusing to take possession of properties after they‚Äôve been foreclosed on, causing homeowners even further financial strain and distress, reports The New York Times (‚ÄúBanks Starting to Walk Away on Foreclosures,‚ÄĚ March 30, 2009).
Mortgage holders are most often abandoning homes in cities where homes are inexpensive to begin with, including Buffalo, N.Y., South Bend, Ind., and Kansas City, Mo, and where home prices have dropped so dramatically that banks no longer see the value in hanging on to a property even if only to strip it of valuable fixtures and appliances.
City officials in Buffalo, for example, say the number of lenders abandoning homes has reached ‚Äúepidemic‚ÄĚ proportions. Just last year the city sued 37 banks over 57 abandoned properties, although lenders actually walked away from far more homes.
‚ÄúThe whole purpose of foreclosure is to take title of the property, sell it and recoup what money you can,‚ÄĚ said Guy Cecala, publisher of the industry newsletter Inside Mortgage Finance. ‚ÄúIt‚Äôs just a sign of the times that things are so bad no one wants to take possession of the property.‚ÄĚ
Homeowners Still Held Responsible for Their Foreclosed Homes
Lenders say that it is no longer financially feasible for them to repossess certain properties, claiming they would lose money once legal fees and ongoing maintenance costs are taken into consideration.
When mortgage holders refuse to take possession of properties after foreclosure, cities often force the homeowners ‚ÄĒ who have already walked away from their homes ‚ÄĒ to accept responsibility for properties that have often gone beyond repair.
‚ÄúIt‚Äôs just a crime the way it puts people in limbo, said South Bend Mayor Stephen Luecke. ‚ÄúThey first off have gone through the grief of losing their house, then they move out and find out that they still own it and have responsibility for it.‚ÄĚ
Technically, according to the Times, homeowners are also liable for continuing to make mortgage payments on the property. Yet, since it is almost impossible to figure out which company holds the loan on a property after the mortgage has been bundled and resold, homeowners rarely resume making monthly mortgage payments.
‚ÄúNobody has any idea who owns what or who‚Äôs responsible,‚ÄĚ said Judy Fox, a lawyer at the Notre Dame Legal Aid Clinic in Indiana. ‚ÄúIt‚Äôs a very common story.‚ÄĚ
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