Local Banks Support City's New Foreclosure Law
YOUNGSTOWN, Ohio – A new municipal ordinance that holds banks accountable for the properties on which they file foreclosures is directed more at out-of-town lenders than local banks, supporters of the measure say.
"They're on board," said Gary Davenport, an organizing fellow for the Mahoning Valley Organizing Collaborative, of the local banking community. "They want to know how they can be good partners in this."
Davenport, city residents and officeholders were on hand Tuesday to announce that the law, passed in January by City Council, would take effect and be enforced.
"The local banks aren't the problem," Davenport said. "It's largely the absentee banks that don't have their interests in Youngstown."
He said that giant lenders such as JPMorgan Chase and Deutsch Bank of California are two of the more active banks that have distressed properties in the city.
Often, properties these banks own sit vacant and dilapidated as the lender stalls the foreclosure process, Davenport notes. These properties in turn represent a hefty tax deduction for these financial institutions, he says.
The law requires that parties post a $10,000 cash bond for every vacant house on which they file foreclosure. The $10,000 would be posted against maintenance and demolition expense the city would incur to take care of the property.
"The hope behind this legislation is that it will make a banker or lender seriously reconsider foreclosure to begin with," he said. "This could prevent people's lives from being ruined because maybe they'll reconsider foreclosure and do the right thing by keeping the owner in the home."
For example, if a property in Youngstown is worth $30,000 and the lender has to post a $10,000 bond, it might not think it's worth the risk of the city using the bond to keep the property up, Davenport explained.
"The banks don't have a whole lot of risk in this as long as they're taking care of the property," he said, noting the only way a bond could be drawn down is if the lender doesn’t comply with the housing code.
Local banks say they support the effort, noting that it's beneficial to the entire community when the neighborhoods are stronger and have stable property values.
"I think we're very fortunate that the local institutions have a good working relationship with the city," says Richard Shafer, vice president of Home Savings & Loan Co., Youngstown. "It's in all of our best interests to address these issues."
Most problems involve properties owned by out-of-town lenders, Shafer added. "What we're seeing in the bi-weekly reports is that there are a lot of out-of-town players, and they don't always follow through with the maintenance and upkeep of abandoned houses."
Shafer said that Home Savings is considerate of the city's goal to strengthen neighborhoods and combat blight, Shafer said, and added that this is one step they can take together to ensure properties hold their value.
The ultimate objective is to take these properties, determine whether they can be resold at retail value, and place them on the market. Other dilapidated structures could be deeded to nonprofit organizations that would then either rehabilitate or raze them.
"They're assessed on a case-by-case basis," Shafer said.
Another goal of the new law is to expedite the foreclosure process of those cases filed, Davenport said.
Since 2004, there have been 5,186 foreclosures filed within the city, he reported. The city has data on 954 houses that sit vacant, 735 foreclosed on or in foreclosure.
Springfield, Mass., was the first municipality to enact such a measure, passing it in 2001, Davenport noted, and he finds the results encouraging. "The rate of foreclosures there are down,” he said, “but the rate of foreclosure completions is up."
Although Canton enacted a similar law, it has yet to be enforced, making Youngstown the second city in the country to enforce these measures.
Claudia Sturtz, a resident of the West Side, said she's been fighting with her bank more than a year regarding her house and stated that it's time that the banks be held accountable.
"The banks have gotten away with basically anything they've wanted to do. No one is checking on their policies," Sturtz states. In December, her bank finally worked with her and agreed upon a loan modification that reduced her payments by $150 per month, but not her interest rate.
She said at least four houses in her neighborhood remain vacant, and now it’s incumbent upon the lenders to maintain the properties if they own them. "We'll sue if they don't," she pledged.
Law Director Anthony Farris noted that the law is designed to stop banks from delaying foreclosure. "The bond is for the circumstances," he explained. "A person gets a letter that says they're being foreclosed on, they take off, but the bank never completes the foreclosure and takes possession of the property."
MVOC's Youngstown Neighborhood Leadership Council was effective in lobbying City Council members and Mayor Charles Sammarone on the benefits of the measure.
Sammarone told guests at the press event that government alone can't solve the problems in the neighborhoods, and cooperation with the public sector is imperative to make these programs work.
Strengthening the neighborhoods has been among the mayor's primary objectives since he took office more than a year ago. "We're working with all the block watches, neighborhood groups, nonprofits and started housing hearings in the prosecutor's office," he said.
The housing hearings are directed at those who have code violations. "It's been very effective," the mayor noted. "We sent out 50 letters, and 30 or 40 respond. People are repairing their property and we're getting people to tear their own property down, so it's not costing the city anything."
The same type of pressure should be applied to lenders not in compliance with the properties they own, Sammarone said, noting that letters were sent last week to many of these lenders informing them of the $10,000 bond requirement.
"We want their cooperation, too," the mayor said of the lenders. "We want them to be part of our team. If we can win this battle within our neighborhoods, every citizen within our community benefits."
Copyright 2013 The Business Journal, Youngstown, Ohio.
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