WASHINGTON, D.C. – September 30, 2009 – (RealEstateRama) — A growing number of lenders are refusing to take possession of homes after they have been foreclosed, leading to vandalism and neighborhood decline in Cleveland and cities across Ohio. In response to this alarming trend, U.S. Sen. Sherrod Brown (D-OH) called for a federal investigation of so-called “bank walkaways.”
“I am concerned that bank walkaways are exacerbating the problems that homeowners are already facing as a result of the foreclosure crisis,” Brown wrote in a letter to the Government Accountability Office (GAO) requesting an investigation of the practice. “I am also concerned that bank walkaways could complicate government efforts to help stabilize distressed neighborhoods through the acquisition, rehabilitation, and resale of foreclosed properties.”
In a typical foreclosure, the lender assumes responsibility for the property once the foreclosure proceedings have been completed. The property is then put up for auction, with the opening bid set by the foreclosing lender. In the event that no one meets the opening bid, the lender takes over the title of the home and tries to resell it. Because the lender owns the property, it has an interest in maintaining the home’s condition and dealing with tax liens.
In a rising number of cases across Ohio, however, lenders are refusing to take possession of foreclosed homes – leading to properties that are neither being sold at auction nor maintained by the lender. The result is an increase in vandalism and a decline in property values in the area surrounding the abandoned home. And foreclosed homeowners – who have been forced to leave their homes – are left with back taxes and housing code violations for homes at which they no longer live.
Brown wrote to GAO Acting Comptroller General Gene Dodaro requesting an investigation of the “walkaway” practice. A full copy of the letter can be found here.
In addition to causing blight and slowing neighborhood rejuvenation, abandoned housing displaces resources from local firefighters and law enforcement. In many cities, vacant properties account for half of the fires and one-third of the arson cases.
Brown is also the author of the Community Regeneration, Sustainability and Innovation Act of 2009, legislation he introduced that would give federal aid to communities with vacant and abandoned properties and homes due to major population and job loss. This bill would create a new, competitive grant program within the U.S. Department of Housing and Urban Development (HUD) targeted toward cities and metropolitan areas experiencing large-scale property vacancy and abandonment due to long-term employment and population losses. More information on this legislation can be found here.
Brown is a strong proponent of providing resources to communities to address the foreclosure crisis and its effect on communities and property values. Against a veto threat from President Bush, Brown and his colleagues successfully passed the Housing and Economic Recovery Act of 2008, which was signed into law in July 2008. The housing bill included $3.9 billion in neighborhood stabilization funds. Ohio cities and municipalities received more than $258 million, which can be used to renovate homes or tear down blighted properties. Brown recently wrote to U. S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan in support of Ohio’s 15 applicants to the second Neighborhood Stabilization Program (NSP2), passed as part of the economic recovery package.