Neighbors wait, worry as banks take longer to sell foreclosed homes

Article Courtesy of Orlando Sentinel

By Mary Shanklin

Published October 23, 2012

 

A neighborhood's chances of recovering quickly from the hung-over U.S. housing market depend not only on how many foreclosed homes it has but also, it seems, on which banks own the properties.

Bank of America, for instance, takes almost two months longer on average to sell a foreclosed property than EverBank Financial does, according to new, nationwide data from the research company RealtyTrac Inc. And BofA, the lending giant that inherited many of its troubled mortgages when it bought Countrywide Financial in 2008, has been taking longer this year to sell its foreclosure properties than it took last year.

A lot of things can happen when long-abandoned houses sit on the market for additional months. By slowly releasing their foreclosed properties, for instance, some lenders have benefited from rising home prices this year; in the core Orlando market, prices are up 16 percent since the start of 2012.

 

But those long-held properties also rack up more unpaid association fees, overdue property taxes, repair costs, neighborhood complaints and even code-enforcement fines as the months wear on.

At Cranes Roost Villas in Altamonte Springs, the first

thing residents and visitors see as they enter the gated community is a leaky corner unit draped in blue tarp so long that the plastic sheeting has started to disintegrate.

 

"Bank of America put a bright-blue tarp on top of roof rather than repair it," said longtime resident Richard Campanaro. "Half of it has blown off. It would make a wonderful haunted house if you wanted to do something for Halloween. It's terrible I wouldn't even want to enter the property."

Last year, it took Bank of America an average of 5.3 months to sell a foreclosure, according to RealtyTrac. So far this year, it has averaged 6.7 months. Deutsche Bank, Wells Fargo & Co., Ocwen Financial and Citigroup have also fallen further behind in selling their foreclosed properties. Through September, all of them were taking at least 20 percent longer than they took in 2011, based on RealtyTrac's nationwide data.

Smaller banks appear to be more nimble when dealing with foreclosures, perhaps because they aren't faced with nearly the same volume of properties, said Daren Blomquist, RealtyTrac vice president. And mortgage servicers with portfolios of higher-end properties are better able to sell those homes than are companies saddled with less-desirable houses.

But the longer a bank-owned house sits idle during the foreclosure process, the deeper it falls into disrepair.

"Banks are not typically too willing to repair these homes, particularly if there are property flippers ready, willing and able to buy the more scratch-and-dent variety of homes and fix them up," Blomquist said. According to RealtyTrac, the number of flippers is up 25 percent nationally and 34 percent in the Orlando area compared with a year ago.

Two nonprofit housing organizations recently filed complaints with the U.S. Department of Housing and Urban Development, accusing Bank of America of failing to maintain foreclosed houses in 10 cities' minority communities, including Orlando's. The groups included photos of houses with unlocked doors, mold, interior walls spray-painted with graffiti, and piles of trash heaped outside.

The Charlotte, N.C.-based lending giant denied any wrongdoing and said it stands behind its property-maintenance-and-marketing practices. "Bank of America is committed to stabilizing and revitalizing communities that have been impacted by the economic downturn, foreclosures and property abandonment," spokeswoman Jumana Bauwens said.

Orlando Code Enforcement Officer Mike Rhodes said he sees repeated problems in low-income areas and elsewhere with houses owned by various lenders. A review of code violations within the city found that Wells Fargo had the greatest number of code infractions among the nation's top five lenders.

A year ago, for instance, Orlando cited Wells Fargo for failing to secure a swimming pool at a foreclosed house in downtown Orlando. At the same house last month, Orlando cited Wells Fargo for overgrown landscaping and debris in the backyard. And just two weeks ago, Wells Fargo got a notice for broken front windows and black water in the pool.

Repeated safety violations at the same bank-owned houses have become such a recurrent theme for local governments that some of them, such as the city of Tampa, have considered establishing foreclosure registries, which require lenders pay $125 to register a property within 10 days of filing a foreclosure notice.

In registering a property, banks have to provide contact information for a property manager in case the house falls into disrepair and the local government or the neighborhood's community association wants some action taken.

Rhodes said there has been some discussion about creating a registry in Orlando, but getting the properties "signed up" does not ensure the houses will be maintained. He said his staff already knows whom to call at most of the mortgage companies with foreclosures in the city, so he questions whether such a registration is necessary.

"You call a company in Texas that manages the assets of Wells Fargo, and they contact someone here," Rhodes said. Calls, though, don't always resolve the problems.

"We've got a situation in Parramore, the property is owned by Wells Fargo," Rhodes said. "There are squatters, drugs being dealt and you name it."

A spokeswoman for Wells Fargo said the company inspects foreclosures monthly, registers foreclosures as required, maintains abandoned houses and secures them.

"We occasionally receive code violations or concerns regarding the condition and maintenance of homes in our servicing portfolio that are not foreclosed," the bank said in a written statement. "If the property in our servicing portfolio is delinquent and vacant, but has not yet gone to foreclosure sale, we will maintain and secure it."

The time JP Morgan Chase takes to sell its foreclosed properties has held steady from last year to this year. Lisa Shepherd, vice president of Chase's REO and Preservation unit, said the company has not changed its sales strategies in the past year but has been able to move more properties as it winnows its inventory.

"When there is less distress inventory in the market, we find there are more interested buyers," Shepherd said. She added that Chase works with local real-estate agents and makes necessary repairs, taking into consideration the neighborhood overall.

Prospects for banks generally to work through their foreclosure inventory in Florida do not look promising. RealtyTrac projects that foreclosure filings in the state will continue to increase for the next six to 12 months, and that will likely increase the average time to sell for many of these lenders during the next year.

"However, because buyers and investors finally appear to be flocking to the market, pulled by low prices and interest rates, I don't expect the influx in bank-owned inventory to cause a major dip in average prices," said Blomquist, the RealtyTrac vice president.

Back in Altamonte Springs, Campanaro said it's sad that he has grown accustomed to the shredded blue tarp that creates an eyesore at the entrance to his neighborhood.

What's even sadder, he said, is what that does to the property values for residents trying to rebuild some equity in their homes.


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