Marketplace Scratch Pad

Housing hot potatoes

Scott Jagow Jul 20, 2009

I thought one of the items from Morning Reading deserved a little more attention. You know how there was talk of homeowners just walking away from their mortgages, and then getting foreclosed upon? Well, apparently, banks are now walking away from the foreclosures.

The Cleveland Plain-Dealer cites several examples, including that of Shawn Martin:

Shawn Martin doesn’t know what will happen to his property on Reno Avenue in Cleveland, where a foreclosure was filed on the two-family rental house in 2006.

The sheriff sale had been scheduled, and Martin figured his lender took possession after he drove by and saw the windows boarded up and a tarp on the roof. But nobody bought it — not even his mortgage company.

“They backed out on it and just left it without even telling me,” Martin said. “It just sat there and decayed without me even knowing about it.”

The house has been demolished and Martin is worried about being stuck with the bill.

“This is a nightmare,” he said.

When a bank backs out of a foreclosure, the deed remains in the original owner’s name, which means they’re responsible for upkeep, back taxes, etc. Here’s another example:

Renetta Atterberry thought she had lost her East 102nd Street house. So she was shocked to learn in January — five years after her mortgage company filed for foreclosure — that it was still in her name.

Worse, the long-vacant rental home had been vandalized and she faced a raft of housing code violations. Since then, she has been saddled with debts of about $12,000 to pay for demolition and back taxes.

“I thought I had nothing else to do with that home,” said Atterberry. “I was so embarrassed and humiliated by this.”

Her mortgage company didn’t buy the house and never took it to sheriff’s sale to see if somebody else would, leaving Atterberry the legal owner, responsible for upkeep and taxes.

An Ohio state lawmaker is drafting a bill that would require lenders to take foreclosed properties to a sheriff sale within a certain period of time. In the meantime, these bank walkaways are only adding to the foreclosure blight on many neighborhoods across the country. Just wait until the empty strip shopping malls that mortgage-holders and banks decide to abandon start decaying. It’s not a pretty picture.

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