Land Bank to Put Ohio Foreclosures Into Profitable Use

by Donald Hanz on Foreclosure Help

The land bank legislation passed recently is expected to put Ohio foreclosures into profitable use. The new legislation, taking effect in July, allows all Ohio counties with at least 60,000 residents – nearly 50 percent of all counties in the state – to form nonprofit organizations that would buy foreclosures for sale and other low-priced homes for sale, renovate them, resell them or rent them out.

The new law has expanded the land bank program into areas outside Cuyahoga County, where the pilot land bank program was launched in 2009 to contain record numbers of foreclosed properties in Cleveland and in surrounding areas. The Cuyahoga program, funded with interests and penalties imposed on delinquent taxpayers, has already acquired a relatively large number of vacant properties.

Governor Ted Strickland, who signed the legislation last week, said that the legislation would help counties deal with the problem of foreclosure properties that are not being maintained by owners. Counties would also be given authority to take over abandoned properties causing blight.

Strickland also cited the role of land banks in preventing a significant number of Ohio foreclosures from falling into the hands of flippers who buy foreclosed properties at bargain prices but do not make any improvements on the properties. They simply add several thousand dollars to their purchase prices and then look for buyers.

In Dayton, officials are starting small so they can minimize mistakes and learn as they go. Carolyn Rice, treasurer of Montgomery County, said she views land banks as only one among several tools of solving the problem of vacant foreclosure properties.

Similarly, Ed Leonard, treasurer of Franklin County, said he is treading cautiously with regards to the land bank program. He explained that any land bank program requires a lot of money and that what Cleveland has done with its land bank program may not be feasible in other areas of Ohio. Interests and penalties from delinquent properties may not be enough to cover the costs of purchasing vacant lands and residential buildings.

Ohio legislators were spurred to approve the creation of land banks because of the rising number of vacant foreclosures causing blight in communities across the state.

A total of 11,286 residential property owners were notified they were already delinquent or foreclosed in February this year, an increase of 1.6 percent from 11,105 distressed homeowners in January. The number of Ohio foreclosures in the real estate owned listings of banks increased from 3,301 in January to 3,333 in February.