Brown Sues Banks
According to an Anti-Flipping Task Force document, Chase Manhattan, CitiFinancial, Deutsche Bank, M&T, JP Morgan, Keybank National, Wells Fargo and Washington Mutual are among the institutions targeted by the suit.
"The banks initiate a foreclosure procedure, the property becomes vacant, and then the banks don't want to incur the additional indebtedness of maintaining the properties and keeping them within code," Mayor Brown said.
"The houses are then boarded up at the city's expense," Brown continued. "If foreclosure isn't completed, the expense falls to the city when the residents of the neighborhood want action. This has resulted in the expenditure of upwards of $2 million in the last few years alone."
The need to demolish these homes creates more problems for the city and the neighborhoods, but according to the mayor, the financial liability belongs to the lenders. Therefore, based on nearly 60 properties, the city has filed suit to make the banks accountable.
"We are saying to the banks that when you do this, you create an impact on the neighborhood and create cost for our city at a major expense," Brown said. The message is that this is harmful, costly, and that the dollars the city has expended must be recouped."
As to what he would suggest to the lenders for the future, Brown said, "Work with people. Don't initiate foreclosures until you can start it, complete it and either maintain or resell the properties."
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gaustad
It about time Brown or anyone starting fighting back. Brown needs to also start law suits against all publicists and newspapers that ridicule this city on a constant basis becuase of poor economy, climate, or whatever.
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david
I linked to the legal over here - Buffalo & Brown v. 36 Banks. The Business Week article about Judge Nowak's reforms is available following that link, too.
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GDC
This could be a good start to stop the madness that has taken this city down for years.
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heather_b
The banks should just stop lending to poor people. Lend to the rich landlords who charge exorbitant rents and ensure that the poor will never get out of the cycle of poverty. The banks are in a no win situation on this one, if they loan to the poor and foreclose, then they are predators. If the banks foreclose then sell the properties as a portfolio, then they are just flipping the debt and not taking responsibility. If the banks keep the property after foreclosure then they run the risk of being sued.
By the way, who is suing the city for all of their rundown and abandoned properties?
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RisingDamp666
The city can beat the banks...once. Then, when the next round of sketchy lending takes place, it won't be the big money center banks that are exposed, it will be nimble players that can just dart out of the market or disappear altogether. Remember EPA Superfund sites? They sued the polluters and won cleanup fees then the polluters filed for bankruptcy and stuck the taxpayers. How hard could it be for a major bank to spinoff a lending company that is set up to take the blows before filing Chapter 11? Yes, banking law is stricter, but don't tell that to the laid off employees of Countrywide. Good luck, Mayor Brown, get what you can...and then stick it in a bank to earn interest for that next round when it will be on us.
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RisingDamp666
The city can beat the banks...once. Then, when the next round of sketchy lending takes place, it won't be the big money center banks that are exposed, it will be nimble players that can just dart out of the market or disappear altogether. Remember EPA Superfund sites? They sued the polluters and won cleanup fees then the polluters filed for bankruptcy and stuck the taxpayers. How hard could it be for a major bank to spinoff a lending company that is set up to take the blows before filing Chapter 11? Yes, banking law is stricter, but don't tell that to the laid off employees of Countrywide. Good luck, Mayor Brown, get what you can...and then stick it in a bank to earn interest for that next round when it will be on us.
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RisingDamp666
...said it twice, twice as nice.
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viking
Little known fact, Banks have insurance to cover lost security interest, If the security interest is negated the banks collect the collateral interest amount. This action will get their attention, and the city could be sued for damaging a security interest of a contract. I see the counselors getting ready.
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benfranklin
Every incursion by a public official into an open market, be it by tax or lawsuit, always has an unintended consequence. It's easy to say "let those kids have the property", or "sue the negligent banks". But in the first case, what are you saying to the homeowner two blocks over who has his property on the market for $40,000?. Sorry, we're giving away houses, and your property will be worth much less til all are given away.
If the banks are exposed to further risk that they can't insulate themselves from, they will raise the cost of money to those that need it, in the same neighborhoods your trying to protect/improve.
There may be specific pieces of these proposals that make sense, but in the long run, to salvage these neighborhoods, the city needs to focus on broader issues that we have talked about a million times, more jobs, more jobs, more jobs.
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xanbuf
I think that heather-b makes an interesting point here. Banks are not interested in having foreclosures, and I did not read (has the author attempted to ask?) if there had been any other efforts from the city/mayor to contact them to work things out other than sue them or "send a strong message". I think that banks are major employers of this region and to not want to work things out and cost us even more with lawsuits is what I understood from this article.
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Dan
Taking a page from Cleveland, I see. Compared to the experience of Cleveland -- and many of its inner ring suburbs, including the community where I live -- Buffalo's problems with home foreclosures are minor.
Then n again, Buffalo has flipping ... not the good kind like on home improvement shows.
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Buffalo30
Heather B has touched on several big issues the city faces today.
Your last point is right on……the city needs to be held accountable for the impact their negligent REO property management has on surrounding areas. As for the banks, this type of lending is why they have risk-based pricing. Don’t feel bad for banks with sloppy underwriting parameters…….it is after all the root of the sub-prime issue. Brown is correct in holding banks accountable for the condition of assets held on their books, but a lawsuit aimed at recovering the city’s costs for years gone by only demonstrates their mismanagement of the situation. Rather, these foreclosed properties should have been slapped with fines by Nowak along the way.
I feel the comment regarding rich landlords charging exorbitant rents is way off the mark. The average CAP multiple on Buffalo residential is not high, and in the low-end areas where rent appears high compared to property value, most landlords will tell you these properties can be anything but cash-cows. All cities need low-income housing, and landlords have to set rents to absorb the fact that these properties will have higher vacancy rates, and higher instances of eviction (evictions cost landlords time and money). Unfortunately there is a cycle of poverty in our city/country, but rent is not the cause, rather the effect.
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Martin
So, let me see, the shady landlord [legion in Buffalo] buys a property and does not reinvest in said property, the bad tenent [also legion in Buffalo] runs the house further into the ground, bank takes over what is now basicly a crap hole and can't sell it and it is their fault...me thinks not. The city should of years ago put a stangle hold on bad landlords and homeowners in the court system with harsher fines and stricter guidlines. As an ex landlord, I also feel that landlords who have to register with the city should then be allowed to register evicted tenents [court evicted] with the reasons why as a data base so the next landlord does not get stuck with said bad tenent. Maybe there should also be a data base of bad lanlords that have been in housing court for violations that banks can take a gander at.
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Sal
Even though Mayor Brown's lawsuit is not unique, I applaud his efforts.
The City of Buffalo should also look into seliing more properties that it has held onto for years for no reason other than job security in the Real Estate Division. If these properties won't be sold, at least state the reason.
Also the City should reform BERC to the point where it can no longer buy properties and sell them privately to city employees as was the case at City Centre Condo a few years ago. This would go along with the Common Council's private sale of the city lot at Wadsworth and Allen.
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xanbuf
So, banks are bad and we can blame them for the mistake of letting people borrow money (which of course these are so inoccent and did not expect that they were getting too big of a deal and would have to pay it back... or better, they'll just wait to be bailed out by the public monies somehow and we all get to pay for this). Noone likes to live in a neighborhood with foreclosed homes,however, to not keep the ones who lived and "payed" for the house responsible in the first place is of poor judgement. The banks may pay, but we are the ones who will pick up the tab somewhere down the line... mayor's efforts to stand out and possibly be the one on the list for Clinton's senate position perhaps? Let's see where his efforts are going to be when he changes or wants to keep his seat?
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Wit
I think some of the commenters might be generalizing a bit. The issue here isn't whether banks or bad, and the city obviously isn't suing them for foreclosing on houses. The problem is a specific bank practice of partial or incomplete foreclosures - where the bank start the foreclosure procedure, but never complete it. The property owner believes they've been evicted and the bank has taken control of the property, but the bank hasn't really done so. Meanwhile, the property sits abandoned and housing violations start to pile up -- and the property owner (not the bank) ends up getting hauled into court and is surprised to find out that they still own the place. In the worst cases, the banks do this on purpose in order to take advantage of the legal limbo to avoid liability and the cost of maintenance... and that is why they are being sued. I seriously doubt it would cause so much of an issue that banks would consider some sort of redlining - mostly because they'd have to deal with the FHA and CRA.
(Admittedly, though, like Heather B. and Buffalo30, I've also had questions on/issues regarding properties that the city itself has or has not foreclosed upon.)
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cyndrome
When a bank lends on a property, the bank takes a partial ownership of the property. How could it be otherwise? After all, if property values were (in a rising market) increasing, and the primary owner were to default on payments, no one would think it unusual for the lending institution to foreclose and resell the property. It would be their right to recoup their investment - and maybe even make a profit. Or if you missed your car payments for a few months you would not be the least surprised to find your car missing from your driveway. I am not saying that banks are the problem, only that it should not be right for lending institutions to ''cherry pick'' what they want to have ownership of when a deal goes south.
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SLEEPL8
Martin---Great idea on the landloard/tenant register. I agree that Buffalo should mandate a permit for residential rental property ownership in order to have some organized system for holding landlords accountable. I also agree that bad tenants should have some sort of "record" to act similar to a credit report to prevent them from burning property owners repeatedly.
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dixiechick
Do you want to see one of the ways 'flipping' is happening in Buffalo, chech out www.genesisrei.com
Their website has changed since I last viewed it, when I was helping a friend look for an affordable appt in BlackRock. The first dig I looked at should have been condemed, and the second, while was somewhat exceptable, had a rent of $650, for a minamally 'rehabed', (meaning slapped on some paint). Just for curiousity I checked out their website, and found that building listed for sale to over seas investers...(ok,) For an amount that was outrageous for this area. At that time, (May of 2007) I could read the forum and questions from mostly overseas investors, or out of townn investers....and found the responding comments quite unbelievable. (I.e. how do I transfer the money, what is my ROI, etc...and the answers were quite wierd.)
Now you cannot access that info unless you are a 'member'. But I surely thought that "Something is Rotten in Denmark" ( or the way real estate was being handled in Black Rock!) They had many many buildings for 'rent' and for sale in B'flo at that time, but if you take the time to check out their website, you will find that they have moved their operation more to Rochester.
I never want to slam a company doing good business. (Good being the operative word there) And I will leave it up to anyone who chooses to check this out to make their own conclusions.
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dixiechick
Okay, I had a rant about flipping proerties in the City and Black Rock in particular.
But I can attest to this; Judge Nowak has been working diligently on this issue, to speak with and attain bank fianacing (for those who have the interest or capital to buy and stay in the neighborhood) for those houses that can be saved. How the banking situation in its current conundrum has been able to work with that, I don't have current information.
I believe that Judge Nowak and the mayor are doing their best. And I agree with the mayor in saying to future lenders, to work with the people. And by the way, Buffalo is not in the least the first to take this action. The City of Baltimore is doing this as well.
Banks and Lending institutons have been doing this for decades. But not to this extent! And we have seen in this city our tax rolls decline because of this practice. It seems to me that in this current economy of, oh heck, I don't know wether to call it greed, or ignorance of new home buyers, (i.e. Full Disclosure!) that lending institutions have gotten the best of us. And we All pay for it. This is not just about people who couldn't 'afford' their houses...it goes much deeper. Flipping isn't just about second home owners wanting to make a profit....it is also about how Lending Institutioins have 'Flipped' their debt to others. I'll find links to that effect after I get some sleep.
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Metropolis
Dixiechick - right on!
---Do you want to see one of the ways 'flipping' is happening in Buffalo, chech out www.genesisrei.com
This scam company flipped a house to someone who I am now trying to help sell their house for - AND they offered to be this new owner's property manager. When I first saw the house it was completely trashed, with ceilings caving in and no winterization. The property manager didnt winterize the house and the pipes froze and busted leaving water damage in the home as well as water flooding their basement. And remember - this is the company that flipped the property to their own customer (yes, an overseas investor) for a 100% profit.
Don't do business with Genesis REI out of Buffalo. Contact a qualified Realtor for advice and some homework on any house you buy, foreclosure or not.
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Einstein
By the way, who is suing the city for all of their rundown and abandoned properties?
Good question! I wonder what Judge Nowak has to say about the properties that his boss owns. I wonder why he is strangely silent on the mass destruction taking place on the west side by friends of the local politico. I wonder why he isn't holding local developers accountable for their neglected properties? Sure, the banks are partially to blame, but it is my opinion that the city is going after the banks because they have money and brand recognition that they want to protect. I guess it won't take too long to reinstate red lining and predatory lending by non-traditional financial institutions. I am also guessing that the combination of the anti-flipping task force, cracking down on delinquent property owners (those who aren't friends of the local politicians), and lawsuits against banks will ensure the demise of the Eastside. But it is good to know that we could always just deed these houses over to squatters and weird collectives. Maybe we should allow the banks to just sign the titles over to anyone who wants the house, as long as they agree not to sell it for a profit, to make all necessary repairs, and to ensure that they keep up with the ever escalating taxes. Good luck Buffalo, we need it.
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KernwatchMN
Metropolis:
Thanks for sharing important information about Genesis Rei, James Graham's flipping syndicate now based in Rochester. Graham is a longtime partner of Tonawanda realtor Daniel Glushefski, who long operated together as Cornerstone Properties. They still work together but have different websites, Glushefski now using http://www.buffaloinvestment.com (also known as Genesis Properties). Graham uses GenesisREI.com.
Together, Graham & Glushefski have founded a "flipping syndicate", training speculators from around the world in how to profiteer in Bflo's & Rochester's struggling neighborhoods. Graham even provides an inhouse "hotel" for speculators visiting from afar.
They have another effective gimmick, "flipping in the name of Jesus", both having "prayer pages" on their websites. And Glushefski being white, while Graham is black, they can are "equal opportunity" . . too often leaving a trail of destruction in their wake.
R. Kern
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KernwatchMN
CORRECTION:
Glushefski (is) now using http://www.buffaloinvestment.com (also known as "PILGRIM Properties") . . . not Genesis.
The foreclosure rates on Glushefski' & Graham's inflated sales prices approach 50%.
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Metropolis
At first read of this article, I thought good old Susan Banks from NBC 2 news did something to piss off Byron. Guess not.
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dixiechick
Thank you Metropolis and KernwatchMN for fleshing out the "Genesis" information.
I was trying not to say anything about the 'religious' aspect of their business, which just disqusts me (but doesn't surprise me). How low can some people go for the "Almighty" Dollar! Geez, I'd sure like to find a way to put them out of business, but then again they would just rise again in some other guise. Isn't there some way to sue them for 'misrepresentation' or something? Just wishing.
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fredrico
I have watched the owners of many houses lose them to the bank and then watched very nice houses fall apart from neglect while on the demolition waiting list. This is a huge topic to me because deep down some of us feel very sad and angry that there has not been a better plan/solution for these houses than to let them fall apart and then demolish them. I am hoping if I keep talking about it something will change. I have been around many of these abandoned houses on a daily basis and I can tell you -from first hand experience- that the first thing that happens to them is thieves come and steal the door knobs, chandeliers, copper pipes, fireplace mantles, stained glass windows, etc. - even thieves realize there is allot of value in these homes. Then the next thing that happens is drug dealers start breaking in and selling their drugs. Prostitutes follow them and because of a lack of anywhere to live start sleeping there. I don't want to gross you out but crack addicts have really bad bowel issues and they leave horrible evidence of that wherever they go (soiled underwear on neighbors sidewalks- etc - it's hard to talk about it). They also leave needles and matches around (some children found the matches a few doors down and started the front porch on fire "trying to make a camp fire" (there was some damage but luckily they were spotted and it was put out before the whole house burned down). Of course the drug dealers need protection - so then I have also had to witness the use and abuse of pit bull dogs. As I am writing this I am starting to get really depressed. IF YOU THINK I am exaggerating AT ALL please come and follow me around for a week - I could use the help. Surely if we can send a space ship to Mars - then we can come up with a better solution for what to do with these houses. I like the idea to give the houses to the disadvantaged for a dollar and help them fix it up-- in return we stop paying for their section 8 (we would save all the section 8 and demolition costs)- I'll bet it will cost allot less than demolition.
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cainvestor
I just finished reviewing the Pilgrim Properties website, and now must leave to throw up! - This guy is a joke and per his own website, he will have to answer to his higher power someday. These people really scare me and I hope operations like his get shut down for good instead of re-opening under different companies.
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