Growing problem: bank walkaways

Banks are increasingly tossing a new wrinkle into the foreclosure process — refusing to take possession of a property after they foreclose.

Billy lends Johnny $10, accepting Johnny’s hamster, Mr. Fluffy, as collateral. When Johnny can’t pay the money back, Billy demands Mr. Fluffy. Sadly, Johnny says his good-byes, delivers the hamster to Billy’s doorstep and leaves. But Billy takes one look at Mr. Fluffy and decides he doesn’t want him. He leaves him on the doorstep.

Mr. Higgins walks by, sees the Mr. Fluffy in his cage on the porch, and takes him away to keep him from dying. After a few months, he sends a bill to Johnny for the hamster food he bought.

“He’s Billy’s hamster,” Johnny explains. “I couldn’t pay him back the $10, and I had to give him Mr. Fluffy instead. That was the deal.”

Billy shrugs. “I changed my mind.”

Mr. Higgins looks at Johnny. “Sorry, kid. looks like he was yours all along. Nobody told you.”

 

* * *

In the real world, banks are going through the foreclosure process (i.e., demanding Mr. Fluffy), then at the last moment refusing to actually take legal possession (leaving him on the porch).

That leaves the original owners — who in many cases have moved out after months of foreclosure proceedings — responsible for the properties, even if they’ve never been aware of what happened. (After all, if someone demands something from you for months and you give it to them, you don’t expect them to quietly change their mind.)

They often learn this fact when they start getting bills from the municipality (Mr. Higgins) for upkeep.

Ironically, one legal issue that’s arising is the difficulty determining who actually holds the deed. A New York Times article on the issue talked about the case of Mercy James of South Bend, Ind., who had been foreclosed on… until the bank changed its mind at the last moment.

In Ms. James’s case, the company that was most recently servicing her loan is now defunct. Its parent company filed for bankruptcy and dissolved. And the original bank that sold her the loan said it could not find a record of it.

The end result of bank walkaways (there’s even a Wikipedia entry about them!) are abandoned homes, some of which become vandalized, dangerous, and worthless.

Read more:

New York Times story

Fox News story

Chicago Tribune story

About Andrew Kantor

Andrew is VAR's editor and information manager, and -- lessee now -- a former reporter for the Roanoke Times, former technology columnist for USA Today, and a former magazine editor for a bunch of places. He hails from New York with stops in Connecticut, New Jersey, Cincinnati, Columbus, and Roanoke.
This entry was posted in The Buzz. Bookmark the permalink.

One Response to Growing problem: bank walkaways

  1. Wanda Rakes says:

    Then the mucipalities should proceed with emniment domain and take the property and either do an escheat sale or put it into a non profit rehab. Some should simply have the land cleared and set asside as a ‘green space’.
    The banks have run over home owners long enough. They need to lose their assets to the city or county that they (the assets) are in. Furthermore this process should take no longer than 4 months. The sad part is many of the negotiations and foreclosure processes are done by what I believe are non-american persons. I have been involved with REO sales for over 10 years and very seldom do I speak to an english speaking american. The non english speaking persons I deal with on a daily basis are nothing more that outsourced call centers.They demand tasks from us as Realtors. And demand is putting it lightly. A study should be done as to who really holds the paper for the mortgages that have gone ‘belly up’. If it could be traced I expect we would be surprised as to how much is outside of the USA.

Leave a Reply

Your email address will not be published. Required fields are marked *