BusinessWeek: Holding Lenders Accountable
City prosecutor Cindy T. Cooper and Judge Henry J. Nowak both made a cover story in BusinessWeek this past week. In the article, the two are recognized for taking the issue of abandoned houses one step further. Instead of leaving no one accountable for the mess that occurs when a mortgage is foreclosed upon, the prosecutor and the judge have decided that someone (or some institution) should be held responsible. If that institution happens to be the bank that lent out the money used to secure the home in the first place... so be it.
I spoke to Henry Nowak about the bold moves that he was suggesting this past summer. As we have witnessed in the recent past, there are ways of getting many of these foreclosed homes back on the city tax base. When a property is foreclosed upon, someone always gets caught "holding the bag". If it's a bank... or a flipper (with money)... or even The City, then every angle must be looked at to keep the house from becoming boarded up. There could be some real monetary opportunities for developers and community organizations if parties are held accountable for their actions (or no-actions). If a bank gets stuck holding a title... then that bank should be responsible for the upkeep and the taxes on the property. If the bank wants out, then a sale to a responsible party is the answer.
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urbanesque
I truly wish that Cindy Cooper and Judge Henry Nowak would hold the city to the same level of accountability. If the city gets caught holding the title, then the city should be accountable for the upkeep on the property. If the city wants out, then they should sell to a responsible party. It is as simple as that. I believe that everyone should be held accountable for their actions.
As far as the risk to banks, I see this as one more obstacle for new homeowners. We are moving towards a point where banks will only lend to low risk customers. The high risk buyer, for instance someone with a short credit history, shorter job occupancy, less than exceptional credit, will be forced to seek other avenues for financing their homes. This will, more than likely, require a greater down payment and a higher interest rate. This is great for landlords, not good for the residents who have a dream of home ownership.
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FrankyBlueEyes
Agreed with your assessment if the City ends up holding the title-they should have to maintain the property......but as far as the banks go, lending to risky clientele is what created the whole subprime blowout (which granted was a bigger issue outside of the Buffalo area)......homeownership is a very liberating thing.....but not everyone is up for it, nor should they be eligible......they need to demonstrate stability in their job before they should be eligible for a mortgage, otherwise we risk foreclosures and the property will become vacant, and we are back to square one.
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viking
The city has to take responsibility for some of the problem, the cost of city controlled services that under funded home owners are forced pay contributes to maintenance decline and delinquencies. The practice of heaping on extra fees by way of penalties, pushes many struggling to keep up over the edge. The relationship between those who contribute to this problem, ( inspectors, court officials, city collection and and tax people) the speculators, brokers and professional flippers need to be examined. Some people have real financial problems not due to their own doing or self inflicted neglect and don't need to be exploited by greedy individuals working within the system. It may be the natural condition for the strong to cull and take advantage of the weak but that conditioning leaves only predators and their conflicts are usually messier and injurious. Suspension or abatement of city related charges of a temporary condition could help address a reconstitution of many problem homeowners.
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RonR
Urbanesque,
While I see your concerns, one thing you are not factoring in is the national market. If the South and West were still in a housing boom, mortgage companies would back off as you suggest but this is not the case. Those areas are looking very risky right now.
The way I see it is lending to C paper in Buffalo is less of a risk on a 100k home then lending to B paper in SoCal for a 500k loan. When you look at the housing market being so low, things can really only go up.
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gaustad
This is why you see a house burning down religiously once a day on the east side.
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Joshua
Fix Buffalo also reported on this.... Also after reading the Buffalo News article about Upstate Boomtown, with a Capital A State money and planning pave the way for Albany’s rebirth , I'm not feeling very good right now, I think I need a TUMS. Some other stats that are not in the online article about the Buffalo Metro Area: Between 1995-2006 a 60,365 pop. loss and a also a loss in high technology jobs, at 6.1% with an average wage at $63,530, lower than the other upstate metro areas (Albany, Rochester, and Syracuse).
I really hate to bring up some of these stats, but I find them interesting especially when they compare other metro areas that in comparison, smaller than Buffalo. Buffalo is soon going to be the 3rd largest area in NY, Rochester is right behind us.
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uptownnc704
This article is pointless. When a Bank takes title to the property, the property is usually placed immediately to auction or within the Bank's own OREO group. (Decision based upon multiple financial variables) The OREO group is responsible for protecting the banks interest in the property. This includes sealing and winterizing the property and marketing it for sale. What many people don't see is the extremely poor conditions the Bank gets the property in the first place. The bank wants the cash, not the property and will do anything to get it out of their inventory and liability as quickly as possible. Someone needs to take a look at rundown property in Buffalo with facts, it should be more likely slum lord or city held, not bank.
And for the record, a property in Foreclosure is not the liability of the Bank until the Foreclosure proceedings are complete. Until then, the mortgager has full responsibility for the condition of their property. Legally the mortgager still owns it.
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MRodgers
uptownnc704, once a lis pendens is filed the bank or financial institution has shown they have interest in the property. This program worked very well for two incomplete foreclosures on Johnson Park in the past two years. 91-93 was being held hostage by Wells Fargo with a price tag of $65,000. This property had two individual structures, both standing in incomplete foreclosure for well over two years. When the bank was cited, it finally sold the property at its value (second building was falling apart - spawling bricks, entire exterior walls coming down, no interior load bearin walls). A young man purchased the property and has since remediated both buildings and we gained a neighbor.
A second was 120 Johnson Park, noted on this site quite a few times. Within one month of purchase after the mortgage company was cited and the price lowerd to reflect the condition, all remedial brick work was performed and another historic property saved. The owner has now become a member of our community with great interest and enthusiasm.
Word to the wise: you file it with your name on it, you claim interest, simple as that. Henry Nowak is no fool, he makes sure all ducks are in a row before instituting a new program and most of his programs have lifted Housing Court from a freshman year for new judges to a springboard for neighborhood preservation (not HISTORIC preservation - but NEIGHBORHOOD preservation).
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apocalypsekirk
To FrankyBlueEyes - Why would you say that the subprime issue is a bigger problem outside of the Buffalo area? Could you cite statistics that back up this claim?
To Uptownnc - Even when a judgment of foreclosure is issued, banks aren't taking title to the property. They've effectively scared the borrower out of the house, won a judgment in court and then abandon the property. It's all well and good if they decide to take title to the property, but if they assess the property and can't spin a profit off of it, then it becomes another vacant property, another crack house, another fire. This article is not pointless; blanket statements like "this article is pointless" are pointless.
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FrankyBlueEyes
To ApocalypseKirk: All I meant was that Bflo would not have had the same amount of the subprime mess, because we did not have the big run up in home prices (we have had nice steady, slow growth here), we didn't have the same amount of people using the exotic financing (such as ARMs) and as a result our loan to value ratios would have not been on a huge roller coaster like other parts of the country.
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nonono
<<>>
at first I thought 'the Queen' was referring to Gerhardt Yaskow, but he's a flipper with beer (and other peoples money).
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uptownnc704
apocalypsekirk - Interesting concept - Too bad that isn't what we did at the Bank.
BTW, if the Bank has no interest in taking title to recover the property then why bother with the FC process? Just charge-off the note and leave the title with the home owner. That's what we did. Saves us a hell of alot of money over a costly FC process. Think about it.
Therefore, owner keeps it. Also, can anyone tell me the leading cause of a Foreclosure? It's Divorce. (before subprime hit)
Why would Frankyblueeyes need to justify a statement that anyone can confirm using business journals, national news and finance\mortgage wires. Clearly Buffalo is not the worst impacted subprime region. If you have proof that Buffalo is worse off then California, Boston, Houston, Dallas, or Florida, i'd love to see it. Point is, you don't.
Smells like an Urban Advocate... work for NACA by chance?
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Dionysus
"Can anyone tell me the leading cause of a Foreclosure? It's Divorce."
Gee it's a good thing we enacted that "Defense of Marriage Act" to protect the sanctity of marriage from those homosexuals who are chomping at the bit to threaten it.
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daisy123
Does anyone know if the Bank is required by law to go through the foreclosure process?
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MRodgers
daisy123, unfortunately not, a "pre-foreclosure" otherwise known as a lis pendens stays on the books for two years. By that time the property has most likely severely decayed. By citing the banks three things can happen. (1) If the homeowner and bank come to court, maybe something can be worked out, (2) The homeowner is also advised that they have a right to remain in the house until such time that the foreclosure process is complete, the bank has sold the property and the new owners evict the old owner. (3) If the owner has left due to the letter that the bank sends (as most do not knowing their rights) the bank is advised that they must maintain the property.
Approximately 63% of our vacant housing can be maintained through this process, if the banks are cited, come to court, and given the word about maintaining the property. They'll probably get a better dollar at auction, too.
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RustBelter
Does anyone here know how to get the housing court to pursue a lien-holding bank? I know of a house which the owners can't repair because a bank is threatening them with foreclosure, but not acting on it? how would you get that bak cited?
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