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Servicing

A response to zombie properties

Effective legislation should produce real solutions

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Even as the nation breaths a sign of relief as the weight of the foreclosure crisis lessens in several states, the struggle is still very real for many Americans and governments big and small. 

With a nod to the past and hope for the future, we are now seeing law makers around the country crafting legislation that contains preventative measures to guard against repeating the same mistakes, as well as considerations for best practices when developing policies and procedures that pertain to the foreclosure process. 

Currently, we are watching a heated battle in the State of New York as Attorney General Eric Schneiderman is pushing the legislature to approve a law that makes banks and other mortgage lenders responsible for maintaining abandoned properties that were vacated by occupants before the foreclosure process could be completed. 

Like most legislation that regulates vacant [zombie] properties, it comes with a hefty fine for those servicers who fail to comply with the law. 

While I will not weigh in on the political battle that ensues or the proposed consequences levied in this bill, I would like to point out that with a degree of common sense, we can create truly effective legislation that produces real solutions.

The State of New York utilizes a judicial foreclosure process that can take up to three years to complete. 

Although a homeowner has the right to stay in their property during that time, it is not uncommon for them to leave the home prior to completion. 

In New York it is estimated that as many 15,000 vacant properties are a result of this problem and nationwide it is guessed to be more than 300,000, according to figures from RealtyTrac.

I have seen first-hand, for the past twenty years, the damage that can be done to a home that has been vacated prior to the foreclosure, regardless of how well it is maintained by the servicer (with the limited legal authority available).

It typically results, by the time the home goes to foreclosure, in the home having little to no value which brings down surrounding property values. 

It is rather obvious that the sooner the servicer/lender can take possession of the vacant property, the sooner it can be held liable for maintaining the property to the neighborhood standard and will go a long way toward reducing blight and maintaining home values.

I think that common sense would tell us that the first step should be developing a way to expedite the foreclosure process for homes that have been abandoned. 

It is common sense because it does not seem reasonable for a home to sit vacant for three years when the owner has walked away from the property.

Logic tells us that this property will be vandalize, become an eyesore and become a burden to its community.

We should aim at solving the problem instead of treating the symptoms.

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