Zombie Foreclosures Are Back -- Again
The Woodstock Institute recently revived the concept of zombie foreclosures and mortgages by issuing a new report. The report details the patterns of zombie properties in Cook County.
For those who aren't familiar with the term, zombie properties are those that are stuck in the foreclosure process. In most cases, the homeowners have long since left the property. The abandoned properties just sit empty and become a blight on the neighborhood. Many properties have been stripped of all valuable materials and are simply gutted shells. Nobody wants them, least of all the banks.
As a result, the properties remain perpetually in foreclosure, with the homeowner as the owner of record. Since the bank does not technically own the property, there is little that can be done to force it to take care of the abandoned buildings. Although the City of Chicago has passed ordninances to attempt to combat this problem, zombie properties remain a very real problem for many neighborhoods in Chicago.
Which neighborhoods, you ask? Zombie properties are a particularly large problem in lower income neighborhoods and neighborhoods with homogenous minority populations. This is unsurprising, as these areas were hit the hardest by the inflation of property values that occurred during the bubble--when property values crashed, they crashed especially hard in these neighborhoods.
The fact that zombie properties remain a recurring theme in the news coverage of the foreclosure crisis is evidence that, even if foreclosures are tapering off, we still have a very long way to go until the negative effects of the foreclosure crisis wane.
The Woodstock Institute's ideas for combatting this problem are good, although most are a bit pie-in-the-sky based on the currently lackluster response to this problem from mortgage servicers and regulators. They Institute's suggestions are:
- Mortgage servicers should notify borrowers, local governments, and courts when they decide to stop pursuing a foreclosure.
- Mortgage servicers should coordinate with local governments, nonprofits, and land banks to return zombie properties to productive use.
- Municipalities should enact vacant buildings ordinances that hold servicers and mortgagees accountable for maintaining homes, even before taking title to the home.
- Municipalities should seek creative ways to expand or leverage existing code enforcement resources.
- The Federal Housing Finance Agency (FHFA) should withdraw its lawsuit against the City of Chicago's vacant buildings ordinance.
- The Cook County Land Bank Authority (CCLBA) needs a dedicated funding source.
- The National Monitor should more vigorously enforce the anti-blight provisions of the National Foreclosure Settlement.