Trade Insiders Highlight Abandoned Properties Where Foreclosure Has Been Delayed

June 23rd, 2008

The increased foreclosure activity in the country is giving rise to a unique situation where mortgage defaulters are vacating their homes but lenders are delaying foreclosing on it.

One of the fall outs of numerous foreclosures has been the decline in real estate prices. As a result sometimes homeowners find that their properties are worth less than the mortgage on them. In such a situation it is increasingly becoming common for the homeowner to abandon the property without completing all the mortgage payments on it.

The onus of maintaining the property then falls on the lender. But a trend is emerging where lenders are delaying foreclosure for some reason. With no one taking the responsibility of maintaining them the homes then fall into disrepair. This not only affects the resale value of the property but also the home values in the whole neighborhood. Becoming an eyesore, breeding disease and attracting crime are just some of the other consequences of this negligence.

The trend was first noticed in January this year and is a source of worry for observers as lenders are usually expected to dispose of distressed properties as soon as possible.

Various explanations are being given for this trend. On the one hand, city officials attribute it to lenders avoiding taxes and maintenance. On the other hand, legal aid lawyers feel that this maybe a ploy on the part of the lenders to hide heavy losses. Declaring such losses could attract regulators, they believe.

The real estate industry has its own explanation for this phenomenon. Industry officials put it down to the high number of foreclosures that lenders have to deal with. There is so much to handle that delays are inevitable, they believe. Says attorney Berry Laws III, who looks after the interests of lenders during foreclosure, “There’s just a glut. Lenders are overwhelmed with properties.”

In spite of all the explanations, real estate experts continue to be worried as the trend is gradually spreading all over the country. The situation suggests that the actual number of foreclosures may, in fact, be higher than declared by official statistics.

Founder Joe Schilling of National Vacant Properties Campaign believes that with foreclosure being delayed in this way, more and more properties are not being accounted for in foreclosure figures. He says, “What it means is that the crisis is a lot more complex than anybody knows. And the conclusion is that this is going to get much worse before it gets better.”