Vacant and deteriorated homes that are not being maintained properly continues to negatively affect the national housing market, and because servicers and banks currently have such a high volume of foreclosures in their portfolios, it is hard for them to know which properties are being vandalized and therefore need immediate repairs.
That is why banks and servicers are stressing that local governments, community members and anyone driving by a vacant property that sees a home with any type of damage needs to communicate this to them as soon as possible because it is vital for any type of housing recovery to occur.
“It is going to take all of us to get out of this situation that we are in, not just the banks and servicers, but the different municipalities, Realtors and various nonprofit groups are going to be huge in getting us out of our current situation,” said Jess Tirado, vice president of REO operations at Wells Fargo Home Mortgage during a session at SourceMedia’s Mortgage Servicing Conference in Dallas.
Tirado added that one solution is not going to fix the housing industry right now because it is so robust and varied. However, he did say that when Wells is aware of a situation or problem at a vacant home it services, the bank takes care of the problem within hours.
“We’ll get someone to address this issue to fix the problem. I understand from a city side or municipality that you’re getting complaints from neighbors about a specific issue that this home has been broken into and vandalized, but this can’t be stopped without making a call to us,” Tirado continued. “Getting the issue into the right hands is part of the problem because it is so big.”
Michael Merchant, commissioner for the Chicago Department of Buildings, agreed that all parties are trying to work together and “be on the same page.” He said what is happening to vacant buildings right now is an “absolute travesty” because drug dealers and prostitution activity are taking place inside these empty buildings.
There are also safety issues at these sites, Merchant said, because pit bulls are housed there and drug dealers are “booby-trapping” these sites. Additionally, backyards have weeds that are eight feet tall and trash is leading onto the roadways, which is a nuisance to neighbors.
In order to stop these problems, Chicago has linked its 311 Call Center to its vacant property ordinance that was created last September which requires owners to pay a $500 registration fee for a vacant property, even if it has not gone into foreclosure.
“So when a 311 call comes in, whoever has registered a building with the city receives an alert to the fact that there is an issue with that building,” Merchant said. “We are also trying to create a bill that would be the same for all cities to secure the buildings as early as possible, shovel the snow, cut the grass and board up the building because we can’t do it by ourselves.”
According to Alfred Pollard, chief legal counsel for the Federal Housing Finance Agency, communities need to come together and identify their problems to get out of the current housing crisis.
“If there are 20 houses on a block and three need to be torn down and four are in foreclosure and two are vacant, I’m not going to buy a property that Bank of America has cleaned up if that’s the only action that has taken place,” Pollack said. “A bigger effort like what Cuyahoga Land Bank is doing is needed.”
The Cuyahoga Land Bank acquires vacant and blighted properties and returns them to productive use through rehabilitation or demolition in order to provide homeownership to prospective buyers and stabilize property values in neighboring communities.
Wells Fargo has focused its REO business on doing more repairs because longer foreclosure timelines have resulted in properties remaining in “bad shape” for an extended number of days, Tirado said. The San Francisco-based bank also reached a partnership with Home Depot to rehabilitate any vacant property that has damage.
“Right now, between 75%-80% of our REO homes are getting repaired, much more than a year or two ago,” Tirado added.
Tom Lin, SVP of community programs at Bank of America, said the Charlotte, N.C.-based bank has established a formalized program to donate vacant properties it owns to more than 400 nonprofits organizations across the country who are then repairing these assets in an effort to stabilize the markets these homes are located in.
Currently, Lin said B of A is focused on occupancy initiatives and is working with several municipalities to develop innovative approaches in home retention strategies.
“Most of the banks sell vacant properties as REO, but we’re trying to change that especially in hardest hit areas,” Lin said as a member of the panel.
“There is tremendous opportunity to work with nonprofit organizations in the public sector to address REO maintenances. But I still think there is a lot of improvement where we are right now as an industry, and a lack of communication between the municipalities and the banks needs to be addressed in order for the proper preservation strategies to take place to create neighborhood stabilization.”
