Foreclosing lenders: Register or pay up
When a bank forecloses on a home, it’s not just a problem for the owner. It can mean bad news for the whole neighborhood.
Too often, until they resell the house, banks and other lenders can make lousy neighbors. Sometimes they neglect the home, which can fall into disrepair. Rats and other pests may take up residence. Squatters can move in. The home might become a magnet for criminal activity. The lenders might not have the lawn mowed or sidewalks shoveled after snowstorms.
The result can be a dangerous eyesore that drags down the entire neighborhood, as both its quality of life and property values suffer.
Montgomery County is not immune to the problem.
Maryland is typically among the top five states with the nation’s highest foreclosure rates and Montgomery County has among the highest rates in the state. According to RealtyTrac, which compiles foreclosure data, the Burtonsville area has the county’s second-highest rate, following Sandy Spring.
And while about 20 percent of lenders statewide are late or don’t register foreclosed homes at all, the Montgomery County rate was 34 percent in fiscal year 2015.
The Montgomery County Council took action on April 18 to combat these abuses.
Lenders are expected to transfer property titles within 30 days of foreclosing on a home, but many take up to nine months to do so – with some delaying for well over a year. Among the biggest offenders are Wells Fargo, Bank of America and large hedge funds.
State officials say many lenders put off transferring titles until they resell the home or they may simply transfer the title from the previous owner to the new owner.
One result is a loss of county revenue, as the title fees on a median-value home in the county average $6,600. Another result is that the county doesn’t know who owns the home, and can’t hold the owner accountable for its upkeep and tax payments.
The new county action, spearheaded by Hucker, lets the county take advantage of a state law that allows counties to levy a civil penalty of $1,000 per day against lenders that drag their feet in registering their foreclosed properties.
“These houses are sitting around and rotting in our neighborhoods,” Hucker said before the nine-member council unanimously approved the measure, which is expected to take effect this summer. “It’s an incentive to get the homes back on the market and also get some revenue to help offset the public safety costs.”
Among the groups supporting the bill were several civic associations in the Silver Spring area, the Montgomery Housing Partnership, and the Greater Capital Area Association of Realtors.
Another supporter is Phillip Robinson, whose law firm, the Consumer Law Center in Silver Spring, represents homeowners statewide who have problems with the same hedge funds and other lenders that the new bill targets.
The new bill is an “important step” in fixing “one piece of a complicated puzzle in dealing with the remnants of the financial crisis,” Robinson said in an interview.
Too often, big banks such as Bank of America, Wells Fargo and Chase, have been “incompetent” managing large numbers of mortgages, so they sell them off to a “new crop” of hedge funds and mortgage servicers that also don’t know how to manage them well, Robinson said.
When the home is occupied, these mortgage owners might fail to work with the homeowners to modify the loans and make them perform, he said.
But another consequence, which the county bill tackles, is abandoned homes, which can become a neighborhood “nuisance” and drag down nearby property values, Robinson said.
“Tom’s bill addresses some of the same symptoms that I deal with,” he said.
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