Bank Forclosures Delayed Due to Oversupply, Low Prices

by Peter Vernon on Foreclosure Crisis

A growing number of banks and lenders are delaying bank forclosures activity and this troubled industry experts who claimed that the trend will not benefit cities with weak housing markets.

According to government officials and housing advocates, many lenders have decided not to put foreclosures on the market because of the plummeting home prices, the large volume of foreclosed houses on their inventory and the costly liabilities they will incur if they failed to maintain these properties.

This trend also troubled distressed homeowners who find their abandoned properties still under their name despite the foreclosure filing. And the sad thing is, they are facing back taxes and fines for violating housing codes.

If lenders would not decide to put the bank forclosures on the market for sale, the properties would remain unoccupied and abandoned and a target for crimes. Ohio Representative Mike Foley said that the troubling development is not only happening in the state but across the country also.

Virginia Tech’s Metropolitan Institute associate director Joseph Schilling said that the issue of banks turning their backs on foreclosed properties is increasing. He explained that lenders may have thought that it would make sense if they just ignore these foreclosure properties given the plummeting property prices and the growing inventory of bank forclosures. He said that the trend affects communities, local governments and homeowners.

This issue has caught the attention of Ohio officials who will require lenders and banks to act on the problem. Representative Dennis Murray has proposed a bill that mandates mortgage servicers or lenders to place foreclosed houses on auctions within a certain period of time, or they erased the mortgage lien on properties.

The proposed law would not require lenders to purchase the foreclosure properties but only to put them on the market for sale. Additional time would be given to lenders who will help distressed homeowners stay in their properties by mortgage restructuring.

On the other hand, Nancy Margaret Russo, a Cuyahoga County judge, has ordered those who were granted foreclosure decrees to file the documents necessary for putting the properties on a sheriff’s sale within 1 month. Failure to do so would mean a charge of contempt.

Russo said that the decision of lenders to delay repossession would just create more bank forclosures not just in Ohio but also across the country.