Banks Just Keep Walking Away From Foreclosed Houses « The Washington Independent
In another sign that the behavior of lenders who disregard their REO properties is gaining attention, The New York Times picks up on the common and scandalous practice of banks walking away from foreclosures.
Last year, TWI detailed the problem of bank walkaways, in which banks decide that the costs of foreclosing on a house with little value isn’t worth it — so, as the name implies, they simply walk away. Cleveland housing professor Kermit Lind, a lawyer in a landmark suit over REOs that we wrote about in the story linked above, calls the result “toxic titles” — the property is left in limbo, with the homeowner gone and unaware he may be still be responsible for the property’s maintenance, while the mortgage company still retains a lien on the property. The city can’t easily seize it, so the costs of demolishing it are added to the lien, and community groups face lengthy and expensive battles to claim it.
Bank walkaways have been going on for a while, especially in places where housing prices never boomed that much. I’ve been surprised and dismayed the phenomenon hasn’t been recognized as the scandal it is.
It looks like that may be starting to change. I wonder if Rick Santelli will rant about moral hazards and those irresponsible banks.
TWI is on Twitter. Follow Mary Kane’s ongoing coverage of the housing crisis here.