Ohio passed legislation yesterday that seeks to prevent zombie homes, or vacant or abandoned residential property, by enacting a fast-track process for mortgage foreclosures.
“Ohio has now put itself ahead of the national curve in fighting community blight,” said Robert Klein, founder and chairman of Cleveland-based Community Blight Solutions, which has worked with legislators for three years to enact a fast-track foreclosure process.
“Outdated foreclosure laws are one of the primary causes of blight in communities across the country, and Ohio is one of only a few states that are doing anything about it,” Klein said.
The fast-track provisions are included in the broader H.B. 390, which was signed on Tuesday by Gov. John Kasich, and becomes law in 90 days.
Currently, due to existing foreclosure requirements in Ohio, homes can sit vacant for at least two years, and become zombie homes, Klein said. The new law will accelerate the foreclosure process to as little as six months at times. This allows the mortgage servicer to take possession of the property before it deteriorates, and increases the likelihood that it can be rehabilitated and sold.
“No one will be forced out of their home by this law,” Klein said. “There are clear protections to ensure that a property is, indeed, vacant and abandoned.”
The property must show evidence that the loan is in default, as well as “clear and convincing evidence” that the property is abandoned. Some of this evidence could include disconnection of utilities, boarded up windows and entrances, vandalism, physical destruction or deterioration of the property or substantiation that neither an owner nor tenant appears to be residing in the property at the time of an inspection of the property by a public official or the mortgagee.
Community Blight Solutions has worked to rehab whole neighborhoods in Cleveland, including what was once known as ground zero of the foreclosure crisis, Slavic Village, by creating a public-private partnership that brings together mortgage servicers, community leaders and residents. The long foreclosure timelines in Ohio — like other states with a judicial foreclosure process — hamper efforts to revitalize affected areas, with boarded-up homes attracting vandalism and further bringing down property values.
“About two-thirds of the 20 states with foreclosure inventory rates above the national average were judicial states," said Marina Walsh, Mortgage Bankers Association vice president of industry analysis in the company's National Delinquency Survey that came out in May.
This law has been in the works in some form since mid-2013. It kept evolving through different bills before being passed in Ohio's house and senate.
“While we achieved broad understanding of the tremendous need to bring our state’s foreclosure requirements into the 21st century, it was the fortitude of these individuals in particular that eventually resulted in passage of this important legislation,” said Klein, crediting the efforts of state Sens. Bill Coley, R-Liberty Township, Jonathan Dever, R-Madeira, and Cheryl Grossman, R-Grove City.
“I commend these outstanding legislators and their colleagues for being proactive in the effort to cure community blight,” Klein said.
Ohio isn’t the only state that’s making these changes. While the U.S. Senate could soon consider new rules governing the maintenance of foreclosed homes and the glut of “zombie homes” that blight many communities throughout the country, the state of New York is taking the matter into its own hands.
Late last week, New York Gov. Andrew Cuomo signed “sweeping” legislation to reform the state’s foreclosure process and address the state’s issues with zombie homes.
Other legislation is being introduced at the national level that addresses the issue. Mortgage lenders and servicers could soon have a whole new set of responsibilities for maintaining foreclosed homes, as Sen. Bob Menendez, D-NJ, introduced a new bill on Friday that would address what his office calls the “zombie foreclosure crisis.”
Other states, however, seem to be at cross-purposes with the goal of speeding up foreclosures. A bill headed to the Milwaukee Senate would strip the city of its right to force quick sales of abandoned, foreclosed properties.