Increasing numbers of banks are also walking away from foreclosures
Share Now on:
TEXT OF INTERVIEWS
STEVE CHIOTAKIS: The number of homes seized by banks topped one million last year. It’s the first time that’s ever happened, according to real estate data firm RealtyTrac. And while the number of foreclosures keeps rising, new report out today from a housing advocacy group Woodstock says we’re also seeing an increasing number of lenders walking away from foreclosures. That’s affecting mostly poor, inner-city neighborhoods where foreclosure rates are among the highest.
Nic Retsinas is Director of Harvard University’s Joint Center for Housing Studies. He’s with us live from Providence. Good morning Nic.
NICK RETSINAS: Good morning.
CHIOTAKIS: So I saw this report out of Chicago today, what about the rest of the country? How widespread is this?
RETSINAS: It is a problem that is increasing. I wouldn’t say it’s widespread yet. But I think it reflects both the falling home values and banks coming to the judgment that it’s just not worth it, as well as a very dysfunctional foreclosure process. So it’s a problem that’s likely to get worse before it gets better.
CHIOTAKIS: This is the clunky foreclosure process, the paperwork and all of that stuff that goes along with it. When a bank, Nic, walks away from a foreclosures, what happens to the property? Where does that leave the property?
RETSINAS: In the near term, it leaves it abandoned, and abandoned means it’s not cared for, it has a negative contagion affect on the surrounding properties in terms of the overall valuation of the neighborhood. Eventually cities can come in and take over the property, but as we all know, cities themselves are often challenged in terms of their budgets to take that on. So it leaves some real scars in the neighborhood.
CHIOTAKIS: Scars in a lot of these neighborhoods as I mentioned, and you too, poorer neighborhoods, ones hardest hit by the foreclosure crisis. Do banks owe anything to these neighborhoods where they’re abandoning these houses?
RETSINAS: I think they do. When the banks made the loan, they also took on a servicing responsibility, and collect a fee for that responsibility. Part of that involves doing this when these kids of problems arose. The fact that they’re walking away I think is an abandonment of that contractual obligation and you couple that with the enormous sort of subsidy that banks get through ensured deposits — it doesn’t seem that there’s a fair trade and the banks are doing their part.
CHIOTAKIS: And they’re still on the hook right for keeping the house up. Who would be on the hook for that, is it still the owner or the foreclose?
RETSINAS: Well at that point the borrower has an additional problem because the borrower now has this lien that could come up at any point in time, because the banks could say tomorrow, well let me restart the foreclosure process. So again it leaves a scar, it leaves sort of a gaping hole in the neighborhood both in terms of the property of the borrower and the city.
CHIOTAKIS: Harvard University’s Nic Retsinas. Nic thank you.
RETSINAS: Thank you.
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.