FORT WAYNE – The two-story house is a picture of neglect: Peeling paint, tall grass and weeds choke the yard, and the frame is falling off the upstairs window. Plywood covers the front door.
The house is just one among thousands of bank-owned properties in Allen County, and like most of the others, the owner is legally invisible – officially, the house remains in the name of the previous owner.
Weed violations and overdue tax bills all get sent to the owners last-known address, even though a sticker on the front window says this property is managed by Chase Home Finance LLC.
How many bank-owned properties are not listed in banks names? No one can answer that question because no one knows how many bank-owned properties there are.
One problem is the foreclosure process can take months or years, and there is nothing in the property records to indicate a foreclosure until the title to the land changes hands.
In fact, though the common term for these houses is bank owned, some banking officials actually deny ownership of them.
In the meantime, the empty house can fall into decay, fall victim to vandals and thieves, be stripped of its copper and become a neighborhood eyesore, or worse.
Now, however, a Journal Gazette analysis provides an estimate: Using the number of foreclosures and the number of bank-owned properties sold through Realtors, one can estimate the number of homes that have been foreclosed but have not been sold.
The vast majority of these properties sit empty.
There were 9,534 foreclosures in Allen County from 2008 to 2011, while about 4,551 bank-owned properties were sold during that time period, according to foreclosure listing firm RealtyTrac Inc. and UPSTAR, formerly known as the Fort Wayne Area Association of Realtors.
That makes at least 4,983 bank-owned properties in Allen County from the past four years worth of foreclosures that remain unsold. But county property records only list about 700 properties where the owner is a bank.
Numerous local officials said they had no idea how many bank-owned properties there might be before the newspapers analysis; afterward none said the number sounded out of line.
An attorney for a state banking group, however, says banks arent really the owners of those properties until a sheriffs sale and so are legally not responsible for them.
Crisis spurs change
Across the nation, city officials have complained that bank-owned properties are crumbling, becoming havens for squatters and vermin, dragging down neighboring property values, and creating fire and safety hazards.
For Fort Wayne officials, the problem of bank-owned properties where the bank was not listed as the owner was so bad it prompted a change in the law.
Before, if it got to the point where we had to take it to court, and the bank didnt show up, that case was dismissed and all that work was for nothing, said Deputy Director of Neighborhood Code Enforcement Cindy Joyner.
After an ordinance change in 2009, however, civil penalties for code violations are attached to the property itself, meaning the lien must be satisfied when it sells, whoever the owner.
Then it shows up as a special assessment on the tax bills, Joyner said.
Allen County Deputy Treasurer William Royce said banks are not transferring title to themselves after a foreclosure for a simple reason – saving money.
When banks do the foreclosure process and do the sheriff sale, they leave it in the old owners name until they have a buyer for it, Royce said. Its more economical for them to do one closure than two, its that simple.
Others offer another reason, also related to money: Banks dont want responsibility for the millions of homes they have taken in foreclosures.
Racial bias at work?
The National Fair Housing Alliance in Washington in a 2012 report, The Banks Are Back – Our Neighborhoods Are Not, says vacant and poorly maintained bank-owned properties are a national crisis.
Further, the advocacy group says, banks are taking care of properties in wealthier, whiter neighborhoods, while those in predominantly poor and minority neighborhoods are falling apart, dragging down areas that were already struggling.
While (bank-owned) properties in predominantly white neighborhoods were more likely to have manicured lawns, securely locked doors, and attractive for sale signs out front, homes in communities of color were more likely to have overgrown yards littered with trash, unsecured doors, broken windows, and indications of marketing as a distressed sale, the report said.
(Bank-owned) properties in communities of color generally appeared vacant, abandoned, blighted and unappealing to real estate agents who might market the unit to homebuyers. On the other hand, (bank-owned properties) in white communities generally appeared inhabited, well-maintained and attractive to real estate agents and homebuyers.
That report, released in April, followed 2011s Here Comes The Bank, There Goes Our Neighborhood, which found similar problems.
An Indiana Bankers Association spokeswoman declined to comment, saying it would not be appropriate for a state organization to comment on a speculative national report.
In northeast Indiana, according to UPSTAR figures, 75 percent of the bank-owned homes for sale were listed with values less than $75,000.
Joyner said some of the worst homes are those where the bank, after foreclosure, has simply abandoned the house. Officials say banks figure it wont be worth it to maintain and try to sell the house in a depressed housing market.
A lot of these foreclosures are occurring from the national banks, Joyner said. Theyve got huge portfolios of these properties across the country – a lot of them, I think, dont even recognize that they own it.
Thats where the citys new ordinance attaching fines to the property has helped, Joyner said. Because the fines will have to be paid when the property is sold, it cuts into the banks profit. Suddenly, Joyner said, banks are being more cooperative trying to fix up dilapidated properties, which is really what everybody wants.
Not until it’s sold
Indianapolis Attorney Thomas W. Dinwiddie, speaking on behalf of the Indiana Bankers Association, said banks are only obligated to maintain a property once they have taken possession of the land through a sheriffs sale.
Even in cases where the borrower has abandoned the property, a lender does not have a right to take possession of mortgaged property, Dinwiddie wrote in an email. Once a lender acquires title to a property, the lender is subject to all of the maintenance obligations as other property owners. Foreclosure can take a long period of time to complete, and what many people think may be a lender-owned property actually is a property that is in foreclosure, owned by the borrower.
Under that premise, if banks are delaying sheriff sales until they have a buyer or they buy it themselves at the sheriffs sale, the condition of the house until then is not their problem, even though they may have started the foreclosure process years ago.
Perhaps because of the pressure from municipalities nationwide, Joyner said, banks do seem to be trying to do better.
Were getting them to appear (at hearings) more frequently than ever in the past, she said. A lot of communities are attaching civil penalties and I think the banks from a national level are aware of that.