Banks Have Had Enough and Are Now Walking Away from Foreclosures

Posted on April 2, 2009
Filed Under Mortgage | Leave a Comment

Banks have had enough, learnt their bitter lesson and are now walking away from foreclosures.

The story of Mercy James is happening everywhere. She had lost her property to foreclosures and asked her tenants to shift elsewhere. Her mailbox had been piling up with matters relating to the foreclosure process. She accepted the inevitable upon hearing of the date of the auction and left her house at the junction of Thomas Street and Maple Street to the mercy of looters and vagrants as well as mosquitoes and rats. But there was no end to her surprise when the authorities of City of South Bend contacted and asked to get back to her old unit and start living there. At the last minute the Sheriff’s auction sale had been cancelled leaving the title to her.

41-year-old James wondered what kind of a game it was as she went about clearing the trash. It is now worth nothing as the city plans to pull it down. James will have to foot the bill.

The concerned housing authorities in cities far and wide – Buffalo, Kansas City, Jacksonville among others, are seeing a new trend that is unsettling them. Banks are refusing to take possession of units that have neared the end of the foreclosure run mainly because of the huge costs involved ranging from legal expenses to maintenance and repairs.

These ‘walkaways’ by the banks spells relief for the borrowers but often it happens too late after they have suffered days of trauma and have made alternative arrangements. According to technicalities they remain under the foreclosure cloud but practically speaking the lender do not accept any more instalments. For the lenders it is a complex, expensive and energy consuming process to find out the original lending papers – thanks to the manner in which the mortgages had been bundled, sliced and sold.

In the instance of James, the company that had been servicing her loan had downed shutters. Its parent firm was in no better condition after filing for bankruptcy and being dissolved. The original bank that inked the mortgage could not trace the document!

Kermit Lind of Cleveland Marshall College of Law, a pundit on foreclosures said, “It is what some of us think is the next wave of the crisis.”

City officials have been filing charges against banks for not looking after their repossessed houses. Their latest move in walking away has recently increased and is picking up.

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