‘Zombie Foreclosures’ haunt housing market
By Greg Stiles, Mail Tribune, Medford, Ore. | |
McClatchy-Tribune Information Services |
Instead, the retired
As neighbors go, "Mr. Bank" isn't a good one, failing to maintain his yard, ignoring a mangled garage door and allowing junk to pile up outside his house. When he does answer the phone, he's none too talkative.
Over the past 12 months, Poulos has painstakingly compiled documents and telephoned a litany of loan and property servicers, as well as the police, and finally
Poulos isn't alone in his frustration with an abandoned house. Across
Real estate agents are begging for more inventory and neighbors are concerned about diminished property values, yet government officials remain perplexed by the "zombie foreclosures," easily identified by the multiple notices stapled to their front doors and taped to windows.
The narrative changes from address to address, but the general pattern is consistent, said
Often, the lender is collecting mortgage insurance payments even as the house falls into disrepair.
"The owner of the property has no incentive to maintain the property in terms of neighborhood standards," said Poulos. "And the banks won't, because they don't have to."
It's well-documented -- especially in states and localities where judicial foreclosures have long been in place -- that banks protect themselves by keeping their names off titles until they are ready to dispose of a property.
"There may be something in the (county) clerk's records indicating the bank has filed something," County Assessor
Yet, it appears the lenders are willing to pay property taxes -- likely to avoid the county foreclosing on the houses under their noses. A check of county records for six
"Banks won't move if it doesn't make sense," said
"There are two primary things that can factor into their decision," Eckardt said. "One, they may have a surplus of REO properties they're trying to move off the balance sheet. The second is, costs associated with foreclosure may be greater than the value. At the end of the day, it's really a case-by-case matter."
Once communication ends between the bank and borrower, the matter drifts into a dark zone.
"After a loan is made at a local bank it goes on to mortgage services, and someone else may purchase the mortgage servicing rights from them," Eckardt said. "Portfolios are sold between mortgage servicing companies."
When the properties actually go through the foreclosure process, it's often with an eye toward institutional investors ready to snap up the right locations, he said.
When it's simply not worth a lender's effort to foreclose, it won't.
"In some areas, foreclosures have an extremely low value and the bank makes a financial decision that it's not in its best interest to foreclose," said
Real estate agents circle such properties knowing the surrounding neighborhoods will more often than not attract buyers. But even the most desirable places can't be bought without a seller to pursue.
"It's very odd and takes a lot of time to figure out who has the right to make a decision about a short-sale property or foreclosure," Helmick said.
Another element keeping houses vacant is investors and lenders collecting mortgage insurance payoffs.
During the downward spiral, Galbreath watched as an east
"The bank was collecting monthly and was in a position where they didn't have to write off a bad loan until the end of the policy," Galbreath said.
Homeowners, and sellers in particular, worry the zombie foreclosures will drive down values in their neighborhood. But a search of county property tax records for homes surrounding zombie properties revealed little tax difference through 2013, indicating little change in value. Gibson said any impact wouldn't take place until the abandoned properties sold.
The presumption, Gibson said, is a house can be sold today and occupied tomorrow.
"Since we have limited resources limiting what we can do, we have to assume every property is 100 percent complete and can be sold at any time," Gibson said. "We deal with every sale in the county; if a sale has gone through, that's when the stuff is cleared up."
Two years ago, legislation was passed requiring mediation by large lenders who foreclose on 175 or more properties annually. That slowed foreclosures to a crawl as lenders reset their strategies. Since then, the foreclosure pace has picked up, but nothing like it was five or six years ago.
Distressed property sales accounted for 14.3 percent of all U.S. residential sales in May, down from 15.6 percent of sales in April and from 15.9 percent of sales in
"Once the inventory of those bank-owned properties decreases, they'll probably try to clear them on the books," said
What benefits a bank's books and what benefits adjacent property owners appear mutually exclusive.
"I was surprised that Chase had an office of real estate owned and property protection," Poulos said. "My next surprise was to find it was a front to placate neighbors."
Attempting to explain the issues with the house next door, Poulos quickly discovered he was up against a rival with vast resources.
"They know what they're doing," he said. "They've done this before, and they are well set up to deal with these situations."
The tags on the house provide phone numbers, but no guarantee of getting answers, Poulos said. The servicer number leads from one call menu to another.
"The increased complexity in the world puts regular people at a disadvantage," he said. "It's unfortunate, because all you can do is keep calling people, putting a burden on them, and try to raise public awareness."
A
On his blog site, Poulos posted a telephone exchange with a Chase Manhattan representative.
When he asked whether the bank was taking any action about the neighboring property, he was told:
"Due to the status of the loan and being that the homeowner still has title, Chase is not able to do any type of maintenance at this address at this point in time."
Poulos, with restraint, went on to lay out Chase's failings:
"It appears to all of us in the neighborhood that you must be delaying this foreclosure, otherwise it wouldn't take over a year. ... It seems like no matter what I do or where I go, that Chase has already been there. It's pretty annoying. ... Your legal office you hired to handle this filed papers over a year ago, so there doesn't seem to be any excuse why this is still dragging out.
"I'm going to have to approach the
Poulos inquired about Chase's time frame, and the response was a simple, "I can't give any of that information."
Even though
State Rep.
"You would think the lender would have the motivation," Buckley said. "If they end up owning a house, they would have an asset to sell again. With the market coming back, you would think there would be motivation to get things resolved and the house back on the market."
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