The Sun-Sentinel in Palm Beach, Florida has been running an excellent series on so-called bad-neighbor banks. They detailed over ten thousand bank-owned properties in ten South Florida cities, most of them acquired in foreclosure proceedings, with major property code violations. Their reporting uncovered that 40% of the bank-owned homes in this area had been cited with violations. This includes overgrown lawns, broken windows, murky pools, holes in roofs, and trash littering the landscape.
Basically, the scam is this. The banks foreclose on borrowers using illegal documents. Then they walk away from the properties after they come into their possession, creating significant blight in the communities. They get out of the upkeep through the same sleight-of-hand surrounding the true ownership of the properties that they tried to hide when they forced the borrower out of the home.
Municipalities cited the banks because they had title to the homes. But some banks deny responsibility for neglected houses for reasons that ordinary homeowners could not, the Sun Sentinel found.
Banks shift the blame, saying maintenance isn’t their job but the responsibility of another bank or company, known as a “loan servicer.” And they delay or evade accountability simply because they are faceless institutions, usually based in other states, even other countries.
Banks are on the hook for millions of dollars in code violations from this neglect, but they end up settling with the municipalities for pennies on the dollar. It’s part of the business model for these companies, you suspect. The key is to get the loan itself off the books, and the exposure to fraud along with it. After that, they don’t consider upkeep on the property they control as a responsibility but the start of a negotiation. They use the legal system to avoid taking control of the properties. They’re known as “bank walkaways,” which is darkly amusing, considering that the banks go on about the dangers of their customers walking away from their homes. There isn’t a more useful explanation for the practice of working so hard to wrest away homes and then shirking the responsibility to actually maintain them.
You may remember the worst side effect of this policy. In 2009, a small child wandered into one of these blighted bank-owned properties and fell into an open swimming pool. He drowned.
The boy’s mother, Margarette Francis, told investigators the water was so dark and thick with “garbage” it was unrecognizable as a place to swim.
“It was, oh, disgusting and I don’t think the baby knew there was a pool,” she said. “The only thing I can tell you is the slide attracted him … He probably thought he was walking into a playground and he walked right into the … water.”
In an additional article, the Sun-Sentinel revealed that citizens are trying to fight back against their bad bank neighbors.
One Fort Lauderdale man got a federal judge to order a bank to take possession of a deteriorating property.
Boynton Beach now cites banks for code violations even before they get title.
And Coral Springs has major U.S. lenders pressure-cleaning roofs and planting shade trees.
Though Florida has been especially hard hit by the foreclosure crisis, state lawmakers have been largely unable or unwilling to tackle the resulting blight — leaving individuals and towns to fend for themselves with piecemeal solutions and limited success.
“There needs to be state legislation to hold these banks accountable,” said Oakland Park City Commissioner Suzanne Boisvenue.
Fat chance of that happening in Rick Scott’s Florida. Especially when the banks know they have much more leverage when they negotiate this on the individual municipality level. Hopefully this series will shame the state into something approaching action.