When Properties Go Into Foreclosure, Who Pays?

Using Q3 2014 foreclosure data reported by the state DHCD, Maryland has held steady as the number-two state for foreclosure filings in 2014, just behind Florida. In fact, foreclosure filings in Maryland have increased since Q2 2014. To put this into context, foreclosure activity has declined nationwide by 15.9% since 2013, yet in Maryland, it has increased slightly, by 0.2%. That means a lot of Maryland families are still losing their homes, particularly in Baltimore City, where foreclosure activity increased from Q2 2014 to Q3. From the report:

Baltimore City with 1,838 filings had the second largest number of foreclosure events, accounting for 15.8 percent of the total. The City’s foreclosures edged up 1.1 percent above the previous quarter but fell 16.6 percent below last year.

Baltimore City Data Q3 2014

Baltimore City also had the second-highest percentage of mortgage defaults, and the third-highest number of foreclosure sales. Lender purchases of Baltimore City homes increased 22.7 over 2013, leading to a large increase of bank-owned homes in Baltimore City. In addition, 21 zip codes in Baltimore City fall into the three “Hot Spot” categories of Severe Foreclosure Activity (two zip codes: 21201 and 21223), Very High Foreclosure Activity (eight zip codes: 21206, 21218, 21213, 21206, 21216, 21217, 21214, 21225, and 21202) and High Foreclosure Activity (eleven zip codes: 21212, 21229, 21215, 21230, 21205, 21205, 21231, 21226, 21239, 21222, 21224). The zip code in Baltimore City that saw the most foreclosure activity overall in Q3 2014 was 21223, a zip code that includes a small part of Pigtown, but also a good chunk of SW and West Baltimore — neighborhoods that have been in decline for many years, and high foreclosure activity will only further the devaluation of properties and these communities.

Who Pays?

The short and simple answer is — we all do, as taxpayers.

Banks don’t have the greatest reputation for maintaining foreclosed homes, particularly in Baltimore City where many of these homes are located in neighborhoods where property values either maintained their historic stagnation, or fell dramatically after the artificial inflation “boom” of the mid-2000s. When property values decline, landlords and homeowners are more likely to walk away from their properties, leaving even more abandoned homes and less taxpayers to pick up the tab for the City’s property taxes. Many times, these homeowners leave the city altogether, decreasing the number of taxpayers overall. This is something Baltimore City can ill afford, particularly when the government is not investing in these communities or doing anything to proactively create a climate where moderate-income families can afford to stay in their homes, whether renters or homeowners. Also, when a bank does take the time to auction off a home it deems of value, in many communities, the home is snapped up by investors, who will then either hold onto it until such time the market improves (which could take years, if not decades, in some neighborhoods) or turn it into a poorly-maintained rental, furthering the costs to taxpayers.

Vacant house fire, Pigtown, 2013

Vacant house fire, Pigtown, 2013

Additionally, when banks fail to maintain the homes they are responsible for, they can further fall into disrepair, costing Baltimore taxpayers thousands of dollars per year for City maintenance, trash removal, additional police and fire services, and even demolition. In a  report issued by the US Fire Administration in 2010,  it was found that close to 28,000 vacant residential building fires are reported nationwide, with arson cited as the leading cause. In addition, property loss is cited at $900 million annually. Even more disturbing, the dollar amount for property loss on vacant structures is almost double that of the dollar amount for property loss for occupied structures.

Considering the number of vacant residential structures in Baltimore, we cannot afford to spend any more time issuing studies and reports — we know what the problem is, we know what to do about it. The time now in 2015 is to act, before we lose more taxpayers, more money, and more property.

What Can You Do About Bank-Owned Homes?

Again, a short and simple answer: Not much.

932 W Lombard Street, abandoned by Regions Bank after foreclosure.

932 W Lombard Street, abandoned by Regions Bank after foreclosure.

You can (and should) report suspicious activity to the police and file 311 complaints if you see that the home is falling into disrepair. But beyond that, it’s difficult to hold banks to even the most minimum of maintenance standards.

It’s difficult for residents to find actual foreclosure information on the “eyesore next door” — the Maryland State Department of Assessments and Taxation data is unreliable, and incomplete. Many foreclosed addresses still list the owner’s name instead of the bank, even when the home has completed the foreclosure process and was sold, either to the bank or another entity. It can take months, if not years, for that information to be updated — and that’s little comfort for neighbors who are being negatively impacted by these homes. There is a Maryland Foreclosure Registry, but it’s not available for public use — again, thwarting the efforts of community groups and individual residents who are stymied by vacant homes in their neighborhood.

Governments Can Act, and Residents Need to Hold Them Accountable!

One idea that’s been taking root, albeit slowly, across the country is for municipalities to require a foreclosure bond from banks, to assist in paying part of the additional costs mentioned above. As you can imagine, the process has been slow in developing, due to pushback from banks — some banks have even filed suit to stop the accountability process.

Baltimore City is facing a budget shortfall — due, in part, to under-performing “grand schemes” like the Horseshoe Casino, but foreclosures and abandoned homes are not helping the city’s budget, or taxpayers’ budgets. It’s time our government took a stand against negligence and decay — and took a stand in favor of taxpaying residents, by holding banks accountable for their neglect, and making them pay for the additional city services needed. This would take the burden off taxpayers, and allow for more investment in some of our more vulnerable neighborhoods.

What You Can Do Now

Ask your City Council representative to please support this idea, today! If you don’t know who your City Councilperson is, please go here and look up your address. Tell them you are no longer willing to foot the bill for negligent property owners, including banks, and there’s a way to hold them accountable and take the financial burden off taxpayers.

If you know of any foreclosed homes in your neighborhood that are not being maintained by the bank or new owners, please call 311 or file an online 311 complaint. If you receive no response or see any action being taken in a timely fashion, please send us an email.