Some Banks Must Pay Cities for Foreclosing on Properties
On January 16, The Columbus Dispatch published an article titled Some Banks Made to Pay Cities for Foreclosing on Properties.
Some banks made to pay cities for foreclosing on properties
Canton officials say they have found a way to hold banks accountable for foreclosed and vacant properties in the northeastern Ohio city.
In three months, Canton has collected $1 million after requiring lenders to post a $10,000 bond for each house they foreclose on.
That’s 100 houses that taxpayers won’t be left to deal with if the properties deteriorate. The bond would pay for repairs to bring empty houses up to code if the banks don’t maintain them. If the property is kept in good shape and is sold, the bank gets back $9,000.
Youngstown has a similar program, and Columbus officials want to learn more.
According to the Franklin County clerk of courts, 5,703 foreclosures were filed last year in Franklin County, including Columbus. That’s the lowest number since 2001.
“There’s no reason we shouldn’t try to do that in Columbus,” City Attorney Richard C. Pfeiffer said.
“It’s something we’re looking into,” said Nichole Brandon, the city’s deputy development director. “Our banks, honestly, are not our problem property owners.”
Brandon said development officials will rely on the city attorney’s guidance. “Our ultimate goal is to get these properties rehabbed, refurbished and sold,” she said.
Pfeiffer said that if lenders are willing to post bond, they must believe the properties have some value.
Canton, a city of 73,000, expects a $750,000 check from Fannie Mae this week, according to Kyle Stone, the city’s fair housing manager.
Noncompliant banks are charged $300 a day for the first 10 days, then $500 a day after that until the fine reaches $100,000.
Those penalties don’t sit well with the Ohio Mortgage Bankers Association.
“That is just criminal,” said Marianne Collins, the association’s executive director. “There’s no way that any servicer can keep up with it. It’s so easy to fail to register.”
In Canton, the registration must include a direct contact and phone number. It must show whether the property is vacant, how long it will remain so, and a plan of how the property will be maintained.
Canton officials say the law is modeled after a program that was enacted in 2011 in Springfield, Mass.
The Springfield program is facing a legal challenge — six banks filed a federal suit trying to invalidate Springfield’s ordinances. A federal judge upheld the laws; the banks are fighting to overturn that decision in the U.S. Court of Appeals, said Tani Sapirstein, a lawyer for the Massachusetts banks.
Mike Adelman, president and chief executive of the Ohio Bankers League, said he has concerns that programs such as these will make loans more costly.
He said his group would prefer a statewide solution to the problem.
Please click here to view the online article.
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders, and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.