This morning the Press Democrat ran a front page article titled: “Fight Against Blight“. It details the plight of Phyllis Sharrow of Petaluma who has the unfortunate luck of living next to a foreclosed property. Weeds have overtaken the lawn of the abandoned home next door and her property value is being affected. Calls to Bank of America to try to get the place cleaned up go unanswered. This has been going on for 2 years prompting her to put a sign outside her home with an arrow pointing at the foreclosure stating: “Bank of America. Your taxpayer bailout dollars at work. Our home values lose!”

And there’s a bigger shock for poor Ms. Sharrow: According to the Healdsburg Housing Bubble blog, Bank of America issued a notice of foreclosure but never completed the foreclosure sale. In other words, Bank of America walked away, letting the property sit there, in limbo, the owners gone and no one taking responsibility for it.

It looks like the home was never foreclosed on and therefore is not owned by the bank.

Is Bank of America just sitting on this loan and letting the property deteriorate? I’ve heard that banks are reluctant to foreclose because A) this forces them to recognize a loss on the loan, and B) if they do foreclose they are the owners and are responsible for the property taxes.

To me it looks as if that is what is happening here. But how long can this go on? You would think the banks would want to flush out these loans before the mid- to high-end foreclosure crisis is upon us.

Yes, you would think that — especially from banks propped up by a taxpayer bailout. So far, however, servicers are too swamped to modify large numbers of loans and — as this case illustrates — banks are walking away from their properties, even beyond the Rust Belt.

You can’t blame homeowners like Ms. Sharrow for feeling like they are hardly getting their money’s worth from that bailout. Maybe she needs to bring that yard sign to Washington, where few are paying much attention to the problem of bank-owned abandoned homes. Instead, as Sen. Dick Durbin (D-Ill.) pointed out recently, the banks own the place.

And those banks aren’t up against outraged and powerful lawmakers, calling them on the carpet for these practices. Business just goes on as usual. Meantime, in the real world, there’s a frustrated neighbor, a two-year battle, and a yard sign calling for attention.

From The San Francisco Chronicle:

John Russo, Oakland city attorney, said the city is gearing up to use California’s new foreclosure-blight law to force lenders to maintain their properties.

The $1,000-a-day fine “is a powerful tool for some tough and fair negotiations with banks,” he said. “The most important thing is to have banks understand that it’s not OK to treat foreclosed properties just like numbers on their ledgers; these are actual homes in the fabric of our neighborhoods. If banks have several properties on a block that they’re holding, waiting for the market to turn, maybe they need to hire security guards. That is their responsibility; it is their property.”

In Boston, city officials aggressively are going after banks, The Boston Herald reports:

City inspectors have slapped thousands of dollars in liens on 43 vacant or foreclosed properties blighting Hub neighborhoods to halt the national housing crisis from spreading more urban decay.

Among those being targeted are big banks, including Deutsche Bank and Wells Fargo, who have ignored their responsibility to maintain the seized homes. The liens, totaling more than $67,000, reflect the cost to the Inspectional Services Department for boarding and securing the vacant properties, according to the agency.

“Pay up or we’re going to take your property,” said Mayor Thomas M. Menino, who is fed up with big banks that continue to let their foreclosed properties languish and drive down Hub property values.

As Mike points out today, Sen. Richard Durbin (D-Ill.) complained last week that banks have so much sway on Capitol Hill that they “frankly own the place.” That same attitude seems to hold true in neighborhoods scarred by bank-owned foreclosures. But with new anti-blight laws, it looks like those neighborhoods are beginning to fight back.