Repo Homes Blog

Because of rising repair and maintenance costs and legal fees and falling home values, more and more mortgage banks have been walking way on property foreclosure.

On mortgage papers and real estate titles, the foreclosure properties still belong to the lenders despite their walkaways, but homeowners have been called by cities to resume their ownership and repair and maintain the foreclosure properties.

The case of 41-year-old Mercy James in South Bend, Indiana illustrates the rising trend of lender walkaways. James asked her tenants to move out of her rental home when it was foreclosed and was scheduled for a sheriff’s sale in 2007. Recently, she was contacted by the city to resume maintenance of her home. When she returned to her foreclosed home, the structure has deteriorated to a point that the city has been planning to demolish it.

When James tried to find out which lender stopped the sheriff’s sale, she can no longer trace it. The servicer to which she paid her last payment has closed and the servicer’s parent company has been dissolved. The original lender which issued her the mortgage said it could no longer find her record.

In Buffalo, city officials have sued 37 banks in 2008 to force them to repair and maintain more than 57 abandoned foreclosure properties which have been causing blight to neighborhoods.

Bank walkaways can be counted in states that mandate the processing of foreclosure properties through courts, such as New York and Indiana. But in states which allow state foreclosures without court proceedings, bank walkaways have been difficult to monitor.

The major factors causing lender walkaways are the declining home values and the fast deterioration of foreclosure properties. Larry Rothenberg, an attorney for creditors’ rights advocate Weltman, Weinberg & Reis, said foreclosure properties have become worthless by the time proceedings reach the sheriff’s sale.

Oftentimes, the values of can no longer justify additional expense. Especially for low-priced homes, it has been easier and less costly for banks and investors to just the write off the foreclosures as bad debt losses rather than going through the hassles of maintaining the foreclosed properties while waiting for years for buyers.

Because of these bank walkaways, the city council of South Bend has been planning to implement a new legal mediation procedure that would allow homeowners to stay in foreclosure properties while the mortgage issue is being resolved. Government officials said this mediation process will help in stabilizing communities battered by state foreclosures.

Two months after President Barack Obama announced his foreclosure prevention plan, the increasing number of repo homes in Florida still remained unabated.

Some areas in the state, such as Florida City and Homestead are experiencing about 25 percent increase in the number of repo homes. And added to that, numerous houses built by developers are languishing in the market, with no buyers showing any interest.

The widespread foreclosures has left many distressed homeowners wonder if they could ever save their properties from turning into repo homes. Adding to their concerns is the projected 100 percent increase in Florida foreclosures in 2009.

Data from the Florida Association of Realtors showed that there were 78,676 homeowners of condominiums and single-family homes who filed for foreclosures between January to October 2008. In Miami-Dade County, 22, 314 repo homes filings were reported.

The current foreclosure crisis has left some homeowners with owning mortgage more than the market value of their properties. Most of these distressed homeowners have tried negotiating with their banks for affordable payment scheme but were turned down.

Real estate professional Cathee Cotton noted that many repo homes have been left vacant for a long time now that they became victims of theft and vandals.

She believed that foreclosures will get worse and will leave a devastation worst than the one created by Hurricane Andrew 17 years ago.

The exodus of homeowners who defaulted on their mortgages and left their properties to deteriorate has also affected many local businesses. Many noticed a decline in sales, while some closed their shops for lack of customers.

In Homestead, about 2,257 foreclosed homes were reported since October last year.

Mayor Lynda Bell explained that she noticed the beginnings of the foreclosure crisis years ago when developers asked members of the city council to approve several projects.

She said that after the Hurricane Andrew, the city experienced financial drought and when things slowly made a turnaround, many were unwilling to turn down real estate projects for fear of hindering the tax base.

She explained that she opposed many multifamily townhome projects because she believed that families belonging in the lower income level could not afford them.

She blamed speculators for the foreclosure crisis and pushing the housing market to the edge of deterioration. And nobody knows what it would take to end the current crisis.

Families renting in apartments and houses in inner cities have become the latest victims of the housing market crisis as more and more properties have been added on foreclosure listings.

Major cities in the United States are experiencing a rapid spread of abandon and vacant homes as foreclosure listings continue to surge in terms of numbers.

And foreclosure has claimed its latest victims: tenants who pay their monthly rents on time and have violated no rules. As more and more landlords in inner cities default on their loans, hundreds of tenants are forced to leave their rented apartments and houses.

And the bad news is, most of these renters were not informed that the apartments and houses where they live are included in foreclosure listings.

Some landlords do not have the consideration to inform their tenants that they are facing eviction because their properties are among those included in foreclosure listings. Before they know what has hit them, tenants are forced out into the street, scrambling to find an affordable place to live.

The widespread problem has influenced the Los Angeles City Council in California to stop evictions and to purchase abandon and vacant buildings on foreclosure listings to convert them into affordable apartments.

Other cities in the country have find ways to address the effects of foreclosures on renters. Cook County Sheriff Thomas J. Dart in Illinois has required banks to provide renters a four-month eviction notice. Foreclosure evictions in the city of Chicago have increased three times since 2007, with 4,500 cases in 2008.

Meanwhile, in Boston, Massachusetts, postcards were sent to renters informing them of their tenants’ rights. The city also mandated property owners to place a sign on their rental apartments or homes with the name of the landlord and contact information. Additionally, Boston is considering purchasing buildings on foreclosure listings.

Evictions are expected to increase as the steady rise of default rate on rental homes and apartment buildings continues. According to Federal National Mortgage Association, delinquency rate for its owned or backed loans was .30 percent for the last quarter of 2008, a quadruple increase from 2007.

According to Dustin Hobbs of the California Mortgage Bankers Association, majority of evictions were initiated by banks that do not want to act as landlords after they have taken over foreclosed properties. Aside from that, banks do not want to hire property managers to look after foreclosed properties, said Hobbs.

Dogs and cats and other kinds of pets have also been suffering from the continued increased in repo homes across the country. As many former homeowners lose their homes and go to home shelters, they have no more space to care for their pets so they give them away to neighbors or animal shelters.

Early this month, President Barack Obama unveiled his repo homes prevention plan to address the growing foreclosure crisis in the country.

Federal National Mortgage Association or Fannie Mae handles troubled mortgage loans and decides who will get a loan.

Last February, just as repo homes filings in the country reached more than 290,000, representing a 30 percent increase from a year ago, the Obama Administration launched its Homeowner Affordability and Stability Plan to help distressed homeowners reduce their mortgage payments through refinancing or loan modification.

With 12,564 foreclosure filings in February, Michigan maintained its 6th ranking in RealtyTrac’s chart of foreclosures by state. Michigan was also 6th in foreclosures by state rankings in 2008 and in January

Homebuilders in California, Nevada, Florida and other foreclosure-laden states are finding it hard to sell their new homes because of large numbers of lower-priced lender and tax foreclosure properties available. Oftentimes, builders are competing with homes they have built two or three years ago.

It has always been assumed that those who could barely pay down payments, the poor people, would immediately succumb to Florida foreclosures.