Once again, Kelly Anbach, a whiz on the internet and inspector in Hinsdale, IL, has found something of interest that I’d like to share. There is a conference in Washington D.C., the National Property Preservation Conference 2009, put on by the mortgage service industry. It’s being held November 4 – 6, 2009. Representatives of the mortgage industry, local government and the federal government are attending. Here is the link https://www.safeguardproperties.com/register/dc09/?p=1 It looks like it will cover many of the issue we are all concerned about.
After a wonderful vacation in Canada (which never got as crazy with bad loans as the U.S. did), I’m back at the computer. Time magazine has an interesting article about reinventing the McMansion. Apparently many of these huge houses have fallen out of favor in this economic climate and rather than let them become bloated blighted structures, some jurisdictions are allowing them to be converted into group homes, film studios, and greenhouses, among other things. Of course, this would require a significant change in local zoning laws. One of the concerns voiced by a real estate professor in the article is about blight in the suburbs if these houses lose their appeal. You can find the article at http://www.time.com/time/magazine/article/0,9171,1924506,00.html
This does not bode well for reducing the number of foreclosed properties anytime soon now that the foreclosures are spreading to regular mortgages due to the owners’ loss of employment This article from the Washington Post describes the problem.
http://www.washingtonpost.com/wp-dyn/content/article/2009/08/17/AR2009081703035.html
The National Vacant Properties Campaign has an interesting summary of different approaches being taken around the country regarding vacant and abandoned property. You can find the summary at http://www.vacantproperties.org/strategies/tools.html I especially like the Chula Vista, CA ordinance approach. This is a description if its ordinance.
The Abandoned Residential Property Registration Program is intended to address those properties that are vacant and financially distressed. The program requires mortgage lenders to inspect defaulted properties to confirm that they are occupied. If a property is found to be vacant, the program requires that the lender exercise the abandonment clause within their mortgage contract, register the property with the City and immediately begin to secure and maintain the property to the neighborhood standard.
They must also hire a local company to inspect the property on a weekly basis. The property must be posted with the name and 24-hour contact number of the company responsible for the weekly inspection, maintenance and security of the property. This will remove the City’s Code Enforcement Section from spending limited resources to act as the property manager. It also allows neighbors to have direct contact with a responsible party. It is hoped that the combination of observant neighbors and an accessible local responsible party will deter and arrest any potential deterioration of the property and thus preserve the neighborhood.
This seeks to address the time between the default on the loan and the sheriff’s sale when the lender actually gets title. Here’s a link to the actual ordinance. http://209.242.175.50/weblink7/docview.aspx?id=52169
Remember how I’ve mentioned before that it’s hard to find the actual lender for these securitized loans because thousands of investors actually can own a mortgage on a property? The “lender” inspectors usually deal with is actually the trustee for the securitized note and not the real lender. For example, you may be dealing with Wells Fargo who is the trustee for Lehmann Brothers securitized note XXX. Wells Fargo is not the lender; it’s just taking care of the true investors’ interests in the note. Apparently this is why so many people are having trouble getting a loan modification. They’re running into the same problem. Here’s an interesting article that describes the problem:
http://www.huffingtonpost.com/propublica/analyzing-the-loan-modifi_b_253890.html
John Caywood from Ft. Wayne, writes:
I am one of the authors of the City of Fort Wayne’s minimum housing ordinance. When there is a violation on a property, we send an “Order to Repair” to both the owner and the mortgage holder. They are required to attend a hearing to answer to the violations. If nobody shows up to the hearing, a civil penalty may be assessed against the property. We have the potential to assess up to $2500 per hearing. This must be paid when property taxes are paid or the property could go to a tax sale. This is getting the attention of lenders in our community. If lenders face the potential of losing houses in tax sales due to penalties racking up, the motivation is there to repair.
This approach works because the city is able to collect the fines because they’re part of the property taxes. I only wish that Illinois had this kind of legislation. Unfortunately, all we can do is lien the property and hope to collect it someday or try to collect it like any other judgment. Readers, do your states allow you to collect debts as part of the tax bill?
Should inspectors be worried about foreclosures involving commercial property? This article in the August 1, 2009 edition of The Economist suggests that this will be the next area of concern. Many local governments are facing vacant storefronts. Will commercial owners walk away from their buildings too? It’s probably best to prepare for the worst and hope for the best. Personally, I’m hearing stories of banks refusing to loan money to commercial building owners who have always been good borrowers because the banks are trying to exit the business of dealing in commercial real estate. This is leaving many owners in terrible financial condition. They have equity tied up in the building they could use to pay bills but can’t refinance to get access to the cash.
http://www.economist.com/businessfinance/displaystory.cfm?story_id=14124366
RealtyTrak has just released a study charting the cities with the most home foreclosures. You can find it at: http://www.realtytrac.com/ContentManagement/PressRelease.aspx?channelid=9&ItemID=6965
The Sun Belt is the hardest hit.
I was in Peoria teaching Legal Aspects this week and met lots of enthusiastic inspectors eager for tips on how to more effective at enforcement. One of the biggest problems we are all running into is who to enforce the code against in the in-between stage in a foreclosure. Too often the owners are abandoning the property but the lender hasn’t taken possession yet and takes a hands off approach while the property goes downhill. This time period can go on for months. I’m also hearing that in some cases the lenders are walking away altogether. I’ve had some success notifying the lender under the theory that it meets the definition of “owner” under the IPMC. At least the grass gets cut. I’ve encouraged clients to begin demolition lawsuits when appropriate but that usually is for half-built structures. Has anyone found any techniques that work well in this situation? There are a great number of these buildings out there and are so detrimental to the neighborhood.
I just returned from St. Louis and Kansas City, MO after teaching the Legal Aspects of Code Administration class. I came across an interesting article in the St. Louis Post-Dispatch about firefighters reconsidering going into vacant structures to fight fires given the risk to the firefighters. Here’s the link:
http://www.stltoday.com/stltoday/news/stories.nsf/nation/story/928FB8B217BCBA4E862575D8000A8315?OpenDocument
I’m a big advocate of vacant building registry so that the fire and police departments are aware when they go on a call that the building is not inhabited. We’re doing it in Hinsdale, IL and the response from those departments have been very favorable. In the town in which I was doing a consultation in Missouri, I was told that in one section of the municipality 12% of the homes were vacant. This makes is even more important to keep track of these structures. There’s no sense in someone getting hurt or killed for a building that has been abandoned and is worth little.
