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America's Foreclosure Epidemic

County Sues Deadbeat Banks
by Robert Franco | 2008/07/25
Source of Title Blog

Foreclosures are through the roof and banks are taking back homes everywhere.  Once the lender takes the home, they become responsible for the upkeep and maintenance on the home; this includes mowing the grass and paying the property taxes.  But some banks are simply letting them go and the Richland County (Ohio) Treasurer's office has had enough.  They are filing tax foreclosures to get the homes sold to someone who will take care of them and start paying taxes.

79 Sherman79 Sherman Avenue was taken back by Deutsche Bank National Trust Co. in November 2006 for $50,000 at the sheriff's sale on a $117,000 mortgage. The prior owner bought the home in March 2005 for $130,000 and the county has the property valued at $112,040.  Currently the delinquent taxes are $4,147.92.

Deutsche Bank failed to respond to a notice the city sent regarding city code violations for unmowed grass.  The city mowed the grass and assessed the bank to cover the expense.

Deutsche Bank spokesman John Gallagher said the servicing company, not the trust company, is responsible for paying the property taxes.

"DB National Trust Co. acts as trustee for securitization trusts and, in some cases, as custodian for the mortgage documents. The function of the trustee is largely an administrative one," he said.

Carrington Asset Acceptance Co., which he said was servicer for the loan, had no comment.

(source: Mansfield News Journal)

This seems a little "dodgy" to me. Sure, the servicing company is supposed to take care of paying the taxes while they are servicing the homeowner's loan.  By the time the forclosure rolls around, the homeowner obviously hasn't been making the payments, so where would the servicer get the money to pay taxes?  Besides that, at this point, the homeowner no longer owns the home and the mortgage has been foreclosed on - that would seem to end the servicer's involvement.

265 Greenlawn265 Greenlawn Avenue was taken back by Homecomings Financial Network in September 2003.  The Auditor's office does not list a sales price - perhaps this was a deed in lieu of foreclosure.  The previous owner had purchased the home in March 1996 for $39,000.  Delinquent taxes total $3,978.94 and the county has the property valued at $27,830. 

The city also sent notices to Homecomings for failure to mow the grass and wound up doing it for them with the expenses assessed to the bank.

According to the News Journal, a spokesman for Homecomings said she could not comment on pending litigation.

340 Wayne Street340 Wayne Street went back to FCI National Lender Services in February 2005.  The Auditor's office does not list a sales price. FCI's mortgage was for $27,353 and filed in August 2000.  The county values the property at $14,270.  It was apparently purchased by the previous owner in June 1994 for only $4,000.  The total delinquent taxes are $2,081.15.  FCI was also assessed for lawn maintenance.

The News Journal was unable to reach FCI for comment.

84 McPherson Street was acquired by First American Title Insurance Company in October 2004 for $8,000.  The previous owner purchased the property for $45,000 in October 1999. The county has the property valued at $47,110 and the tax bill totals $1,782.98. 

It would be interesting to know the circumstances that led to a title insurer acquiring title - perhaps a title insurance claim. 

The delinquent taxes in this case seems to be the result of an error on the Treasurer's part.  According to the News Journal, the tax bills were sent to the wrong address.

First American spokeswoman Carrie Gaska said the county used an erroneous address on tax bills, sending them to 111 instead of 1111 Superior Ave. After the mistake was discovered, the delinquent taxes were paid, she said.

"Had the bills been sent to the correct address, they would not have gone delinquent," Gaska said.

 However, as of yet, the Auditor's office does not show a payment.

These homes are not in the best part of town. They are all located near the downtown area and it appears most were owned as investment properties - rental units on the low end of the spectrum.

The goal of the county is clear - get the properties sold before they deteriorate beyond repair.

Matt Finfgeld, delinquent tax collector for the treasurer's office, said none of the banks sued was local.

"It's those out-of-town banks that just walk away. To me, it's just amazing," he said. "They're not that delinquent. But the houses are vacant -- and if we don't get them soon, they won't be in a shape where they are livable. After they've been sitting there vacant for two or three years with no heating and no lighting, it doesn't take long for them to deteriorate.

"If we don't get to them quickly enough, there are going to be demolition orders, or they're not going to be in shape to sell again."

I have seen some lenders voluntarily release mortgages, leaving them free and clear for the owner, just because they didn't want to take them back.  If they were to take back some of these properties, they would not possibly be able to sell them for enough to cover the costs of the sale, let alone recoup  their losses on the defaulted loan.  While they are sitting vacant, the banks could be subjected to fines and penalties for failing to maintain them.  Ultimately, they could even be faced with a demolition order.

This is what happens when lenders loan far more than these properties are worth.  Investors have little to lose by letting them go and the lender rarely wants to take them back. 

But, if they do decide to foreclose, they need to be responsible property owners.  When they fail to maintain the properties and pay the taxes, the local communities suffer.  Surrounding property values decline and the county loses a part of its tax base.

Kudos to Richland County for taking action against the deadbeat lender. 

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