January 14, 2011
Over the past couple of years there’s been plenty of smugness and disdain pitched in the direction of people who have walked away from mortgages. Never mind that many of them were lured into loans they couldn’t afford, lost jobs and couldn’t find replacements, saw income from their modest investments shrink, couldn’t get a break from the Home Affordable Modification Program and got no relief when cramdown proposals failed. Irresponsible! went the cry.
So what’s going to be the response now that banks are abandoning properties they own? At the Chicago Tribune, Mary Ellen Podmolik writes:
A new type of property is adding to neighborhood blight: the bank walkaway.
Research [released Thursday], the first of its kind locally, identifies 1,896 “red flag” homes in Chicago — most of them are in distressed African-American neighborhoods — that appear to have been abandoned by mortgage servicers during the foreclosure process, the Woodstock Institute found.
Abandoned foreclosures are increasing as mortgage investors determine that, at sale, they can’t recoup the costs of foreclosing, securing, maintaining and marketing a home, and they sometimes aren’t completing foreclosure actions. The property, by then usually vacant, becomes another eyesore in limbo along blocks where faded signs still announce block clubs.
“The steward relationship between the servicer and the property is broken, particularly in these hard-hit communities,” said Geoff Smith, senior vice president of Woodstock, a Chicago-based research and advocacy group. “The role of the servicer is to be the person in charge of that property’s disposition. You’re seeing situations where servicers are not living up to that standard.” …
In November, a U.S. Government Accountability Office report on the frequency and impact of abandoned foreclosures noted that Midwestern industrial cities, including Chicago, seem to bear the brunt of bank walkaways, leaving neighborhoods in deeper distress and cities left to shoulder the associated costs of dealing with unsafe, often unsecured homes.
So, it’s obscene for individuals to walk away from mortgages they can no longer pay for but bankers think it’s OK for them to do so and leave the problem for communities to deal with? You can bet they’ll be able to write off their losses. But home-owners who live in neighborhoods where banks are walking away won’t be able to write off their own losses associated with collapsing property values. The banks also won’t have to deal with the inevitable rise in crime and other problems unoccupied properties generate. C’mon. Let the taxpayers and financially strapped municipal treasuries deal with that.
But, hey, don’t ignore the bright side. Thanks to taxpayer assistance and low interest rates, the banks are back in the black and expecting to clock $70 billion in profits for 2010.