I read this article on the front page of the Milwaukee Journal Sentinel . Mortgage lenders have made a calculated decision to abandon completing the foreclosure process because it is too expensive.
For years, lenders complained about debtors who left the keys on the kitchen table and skipped town, leaving it to the bank to file for foreclosure and eventually take title by buying it at a sheriff's sale.
The latest twist: Now it's the lenders who are doing the walking, often without telling the borrowers, who may believe erroneously they have already lost title.
Once mortgage lenders consider the expenses involved in foreclosing the property and the fees needed to resale the home, many lenders decide it far cheaper to not take legal possession of the home.
The city of Milwaukee has nearly lost $400,000 in back taxes from these walk-away mortgage lenders.
As the Sentinel writes, the walk-away lenders have no shame in how these home are depreciating property values in the neighborhood.
Local housing officials and real estate agents who deal with foreclosed and abandoned properties say out-of-state lenders don't know the condition of a property when the foreclosure process starts. By the time their representative checks out the property, it already may have sat vacant for months, making it a target to vandals, squatters and Wisconsin's harsh winters.
"The pipes will burst and the city fines my clients and it's a real freakin' mess and nobody is sure who has what rights," said Michael Watton, a bankruptcy lawyer who said he tells his clients to stay in a house until the legal processes are concluded.
These walk-away mortgage lenders say their obligation is to their investors and not the city or other property owners.
Loan-servicing companies argue they have a fiduciary duty to the investors who bought the mortgage, not to the neighborhood where the home is located.
"We do the cost-benefit analysis (for) the investor," said Jeannine Bruin, GMAC's executive director of mortgage communication. "Is he going to recoup any money for us to go through the whole process of foreclosing, fixing the property up, marketing it, selling it? Is anything coming back to that investor? If not, it's best to just let the borrower keep ownership of the home."
If you have a chance, read the article. I live in a small community, thus my city can take on maintaining the property. My city, unlike Milwaukee, has stopped vagrants and criminals from occupying these abandoned properties. For Milwaukee, it is probably more difficult to keep track of the foreclosures. The only legal recourse for Milwaukee is to foreclose on these properties for back taxes.
I'm curious, can the city sue the mortgage companies to recoup some of their expenses?