Monday, March 30, 2009

Who Is Left Holding The Bag?

If this wasn't so depressing, I'd be laughing my ass off (emphasis mine)
City officials and housing advocates here and in cities as varied as Buffalo, Kansas City, Mo., and Jacksonville, Fla., say they are seeing an unsettling development: Banks are quietly declining to take possession of properties at the end of the foreclosure process, most often because the cost of the ordeal — from legal fees to maintenance — exceeds the diminishing value of the real estate.

The so-called bank walkaways rarely mean relief for the property owners, caught unaware months after the fact, and often mean additional financial burdens and bureaucratic headaches. Technically, they still owe on the mortgage, but as a practicality, rarely would a mortgage holder receive any more payments on the loan. The way mortgages are bundled and resold, it can be enormously time-consuming just trying to determine what company holds the loan on a property thought to be in foreclosure.

In Ms. James’s case, the company that was most recently servicing her loan is now defunct. Its parent company filed for bankruptcy and dissolved. And the original bank that sold her the loan said it could not find a record of it.

“It is what some of us think is the next wave of the crisis,” said Kermit Lind, a clinical professor at the Cleveland-Marshall College of Law and an expert on foreclosure law.
The real estate market has gotten so bad that the costs of foreclosing on some houses now exceeds the value of the house. The owner has walked away, the bank is walking away, and due to the maze of arcane bullshit that is your average CDO, nobody seems to know who actually holds the title to the home.

The practical upshot? The city/county taxpayer gets stuck with the bill and an eyesore of a vandalized, broken down property they can't move and they have to maintain, losing money off of it. Now multiply that by thousands nationwide, and you're beginning to see why we're only beginning down the steep slope to hell.

The commercial real estate crash is bad enough, but the residential real estate crash still has a long, long way to go.

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