Reclaiming Abandoned Houses Presents Legal Maze
WARREN, Ohio – The seminar was billed “Bank Walkaways: Public Nuisances and Their Creators.” But in his hour-long presentation, the principal speaker, Zachiariah Germaniuk, made the case that a more accurate title would have been “Mortgagor Walkaways.”
The subject was the large number of houses abandoned and left vacant since the onset of the Great Recession in early 2008 and how citizens and local governments can proceed to reclaim or rehabilitate the properties.
Short-term solutions are under way and working in a limited fashion, Germaniuk said Wednesday night, but long-term solutions are needed if the socioeconomic problem is to be overcome. Because the city where he grew up is one of the smallest entities in the state tackling the foreclosure dilemma, it should encounter less red tape and, he said, “Warren has the opportunity to experiment” and be a model to larger cities.
The city has 141 “walkaways,” the law school graduate reported, “40% of the walkaways in Trumbull County,” most of them in minority neighborhoods where the households have low incomes. And where the U.S. average is two years before efforts begin to do something about an abandoned and vacant house, it’s three years in Warren.
That might be because a property must be reported as vacant before any steps, including registering it in a land bank, can be taken.
It will be “at least a generation” before the ruined neighborhoods and ruined lives caused by the housing bubble that burst in 2008 is resolved, Germaniuk said as he reviewed its history, aftermath and why it’s taking so long. One is that each solution is filled with hurdles.
Both Warren and the state of Ohio have laws on the books that could hasten solutions, the speaker said, but the will to enforce them is half-hearted because of the time and resources required.
Germaniuk, who graduated from the Cleveland Marshall School of Law last May, has taken the state bar exam but won’t know whether he passed until late October. Joining him at the program sponsored by the Trumbull Neighborhood Partnership were Trumbull County Treasurer Sam Lamancusa, also president of the Trumbull County Land Bank, and Leah Ifft, who described herself as a “foreclosure prevention advocate” employed by ESOP, the acronym for Empowering & Strengthening Ohio’s People.
ESOP, which began as a grassroots organization in 1993 on the east side of Cleveland, is certified by the U.S. Department of Housing and Urban Development as a housing counseling agency. It has 10 offices across the state including one in Warren.
One strategy neighborhood residents and municipal officeholders can adopt in reclaiming abandoned properties is putting them in a land bank, simple in concept but cumbersome in practice, Lamancusa and Germaniuk said.
Lamancusa told the audience of 50 in the Raymond John Wean Foundation building that the Trumbull County Land Bank will pay a commercial bank or mortgage lender up to $5,000 not to walk away from a property it has acquired through foreclosure, usually at a sheriff’s auction.
Ifft advised homeowners in arrears in their mortgage payments or concerned about falling in arrears, “You should never pay for foreclosure prevention services [because] there are a lot of scam artists out there.” ESOP and all other reputable mortgage counseling services provide their services at no cost.
She told of one come-on where the scam artist offered to refinance a mortgage at 2% and reduce the principal -- for a $4,000 fee. Honest counselors never charge, Ifft iterated, and most work with HUD or the state of Ohio in an effort to arrange terms their clients can manage because of medical bills or losing their jobs. The terms often include grants the homeowners can use to pay their mortgages or catch up on late payments.
Despite news this year that sales of houses are rising and the average price is rebounding, Germaniuk suggested that the U.S. housing market is yet to hit bottom.
Hindering efforts to clean up neighborhoods in disrepair “is a misinformed federal response,” Germaniuk stated. Under the Housing and Economic Recovery Act of 2008, each state was allocated $19 million through HUD when “each metropolitan area in the nation needs $10 million,” he said. On top of that, HUD restricts the grants by “emphasizing prevention when funds are needed [to reclaim] abandoned properties. HUD regulations do not address walkaways.”
Another stumbling block is the all too common misperception of what takes place when a lender send a foreclosure notice to the mortgage holder behind in his payments. It’s not an eviction notice, Germaniuk emphasized.
The occupant need not move until a sheriff’s auction sells the house and evicts the household. Until that time, the borrower, not the lender, is responsible for the upkeep and maintenance of the property.
Germaniuk allowed afterward that if the person who took out the mortgage were behind on his payments, he would have difficulty maintaining his home.
Copyright 2012 The Business Journal, Youngstown, Ohio.