Los Angeles cracks down on banks and lenders who let foreclosure property fall into disrepair
Los Angeles is getting tough on the owners of foreclosed properties who leave them empty and let them fall into disrepair by increasing fines.
In particular officials are cracking down on financial institutions such as banks and mortgage companies that seize properties and leave them to fall into a state of disrepair.
It is the city’s largest attempt to date to deal with a neglected 27,000 foreclosed properties that become an eyesore and also bring down the prices of neighbouring real estate.
‘It is right that the banks should be held accountable to cleaning them up. A lot of vacant homes have become a nuisance because of the foreclosure crisis,’ said Betty Steele, one of several community activists who is encouraging residents to report problem properties via the city’s 311 hotline.
New rules mean that officials can hand out fines of up to $100,000 against financial institutions that seize homes and allow them to fall into disrepair. They also mean that lenders, who often don’t consider the properties their responsibility until the title is transferred, are now responsible as soon as they issue a default notice.
They also require lenders to register their inventory of properties which will make it easier for officials to identify bank owners because property records lag behind property transfers and the foreclosure market is very fluid. The new registry should allow inspectors to easily identify owners when constituents call in to complain about a property.
But the California Mortgage Bankers Association criticised the moves and said it creates unnecessary paperwork for lenders because property records already are publicly available. ‘Increased bureaucracy is not the answer. Lenders and banks have a vested interest in keeping up homes because the better condition the house is in, the more money they are going to recover when they sell that house,’ said spokesman Dustin Hobbs.
California is one of the worst hit states in terms of foreclosures and overall the number of foreclosures is still rising in the US and expected to continue doing to this year and into 2011.
Real estate foreclosures in the US reached a record for the second consecutive month in May, with increases in every state, as lenders stepped up property seizures, according to the latest report from RealtyTrac.
Bank repossessions climbed 44% from May 2009 to 93,777, while foreclosure filings, including default and auction notices, rose 1% to 322,920. One out of every 400 US households received a filing.
Senior vice president Rick Sharga warned that a quarterly record for home seizures is possible if June is anything like May. He predicted last month that another five million delinquent mortgages will end in foreclosure in addition to properties that had already been repossessed.
And it is nowhere near the peak. ‘The second quarter won’t be the peak. I’m not even sure 2010 will be,’ he said. He added that the total amount of individual filings could reach as high as 4.5 million in 2010, up from 3.9 million filings in 2009.