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Politics and zombie foreclosures

March 29, 2014

Housing market returning to ‘normal,’ report says” by Jim Woodard

In recent weeks, several reports have noted that the housing market has returned to a “normal” level of activity.

except,

Q: What are “zombie foreclosures“?

A: They pose a rising concern for mortgage professionals. Foreclosure filings are down to record lows, but a more sinister-sounding problem may be on the rise — “zombie foreclosures

From Daily Finance: “How to Kill a Zombie (Foreclosure) in Your Neighborhood” by Brian Lund:

zombie foreclosures: properties where a foreclosure was initiated and the homeowner has walked away, but the bank hasn’t completed the process, leaving it in limbo

According to Realty Trac, one out of every five homes currently in foreclosure is a zombie property, and in certain metro areas in states like Florida and Nevada — hit especially hard when the housing bubble burst in 2008 — that number can be as high as one out of three.

Lund offers some advice on how to confirm if a rundown property is really a zombie foreclosure and how to try to push pressure on the bank to clean it up (to kill the zombie).

To address ‘zombie house’ blight, two strategies” By Jill Terreri:

representatives from federal, state, county and local governments came together Friday to announce two initiatives to stop zombie foreclosures from bringing down communities and to put other vacant properties back on the tax rolls. They discussed solutions that include state legislation to hold banks accountable for maintaining houses in foreclosure and the hiring of an executive director for a local land bank aimed at dealing with other types of problem properties.

Attorney General Eric T. Schneiderman is developing legislation that will create a statewide registry of zombie foreclosures – there are an estimated 15,000 of these properties statewide – so municipalities can track abandoned homes and enforce property codes. The bill also makes banks responsible for the upkeep of the houses. It would close a loophole, changing state law to make lenders responsible for delinquent properties soon after they are abandoned, not at the end of the foreclosure process, which can take years.

And also in Buffalo news: “Off Main Street“:

Schneiderman stressed that the phrase “is not something that my daughter and her friends made up, obsessed as they are with zombies. That’s actually what they’re called.”

That seems mildy disingenuous because until Senator Schumer also used the phrase, I think AG Schneiderman was the most official user. He didn’t make it up, but he’s definitely a major proponent of this phrase and I don’t think it’s fair to says that’s just what they are called. They are called that at least in part because he is calling them that.

Similarly, Rep. Brian Higgins, D-Buffalo said:

deteriorating houses are like cancer

Somebody wake the zombie of Susan Sontag to explain why that’s wrong; cancer is like cancer, deteriorating houses are like deteriorating houses – illness is not metaphor … except maybe it is?

Also, some of the comments on these news articles are worth perusing, particular a thread on Lund’s Daily Finance article, where commenter RMS recounts:

A big part of the problem are the banks themselves that hold the mortgages. They are unwilling to help the homeowner avoid foreclosure by offering refinancing options or help them through a short sale. Citi Residential lending pulled this on me when I tried to work with them on a short sale. They dragged their feet on the offers that came in, and all the potential buyers went elsewhere when they grew tired of waiting. Citi would not work with me on a refinance since there wasn’t any equity in my “upside down” property. Eventually I walked away, they foreclosed after a year, and got less for the house at a foreclosure auction than they would have gotten on the short sale. I have no sympathy for the banks. BTW, my loan was not a “sub prime” loan, I had great credit and 25% down when I bought the house.

The first reply to that comment is apropos, emoore2927 writes:

They should be offering very favorable terms on refi’s. It would be nothing but a win-win for the bank and the homeowner.

And that would make sense if we lived in a nice world. Unfortunately, here’s the next two comments:

From twosharks:

Hey RMS,
Thanks a lot loser:
It is pieces of sh** like you who caused the whole real estate collapse that cost responsible people millions….

and biwatch69:

Exactly why is it our fault that you paid more for a house in the go go economy days, than what it was worth? Pay your bills you piece of garbage. People like you are the reason we have no economy. Stop looking for a handout or forgiving debt…PAY YOUR BILLS. I have been paying my mtge for almost 15 years, and while I have equity, I am not studying the market price on a daily basis. Pay your bills. In addition to your sacked credit score, I sure hope the IRS sacks you for the bad debt.

Why do I suspect that both of those people work for banks? Maybe they don’t, maybe they just really believe that there was no bank fraud that caused the 2008 collapse? They think it was just the buyer’s fault that the whole world economy crashed and that they couldn’t pay their bills on home values that had been artificially inflated by underhanded deals between real estate developers and mortgage lenders?

The banks created this mess, the government bailed them out, and still people want to blame the homeowners. The banks induced people to default, refused to negotiate in good faith, and are hoping that five years later they can convince us that everything is normal and that it’s the fault of the greedy buyers not the greedy bankers.

But as Terreri wrote:

getting legislation that affects banks passed in Albany is not simple.

With Governor Andrew Cuomo facing re-election, it seems unlikely that he’s going to want to sign anything that might hurt his political donations. Big bankers on Wall Street don’t want to pay fines on property any more than they want income taxes for preschool.

Maybe it’s just money that’s the cancer.

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