Banks Argue for Reduced Fines for Zombie Foreclosures

A bank is lobbying for a 90 percent reduction on city fines issued for code violations after allowing a 2011 foreclosure property to lie vacant and unkempt in a neighborhood for the last four years. zombieforeclosure.jpg

Wells Fargo is asking that the $57,000 in fines be reduced down to $5,700 after the bank took corrective action on the issues.

Now, let’s set aside the fact that when the financial crisis came to a head, lenders were loathe to give homeowners a break in the form of principal mortgage loan reductions or modifications that would have made payments more manageable. Let’s set aside the fact that the whole reason the financial crisis occurred in the first place was because lenders an mortgage services acted unethically and at times illegally in the way mortgages were sold, bundled and re-sold. Let’s set aside the fact that when the banks were fined for these actions, they promised to make it right by paying billions of dollars – much of that in the form of credit to distressed homeowners – and that they often failed to follow through on those promises.

Just looking at the allegations relating to these so-called “zombie foreclosures,” the banks were not only creating blight in foreclosure-ravaged neighborhoods, which in turn slashed property values.

What these banks were doing in neglecting these properties was to create a very real danger for those who remained nearby.

Take for example the reasons why Wells Fargo racked up such hefty penalties: Missing fences, a stagnant swimming pool and overgrown grass. These issues are potentially perilous to neighbors, particularly children. Stagnant swimming pools are breeding grounds for all types of insects, namely mosquitoes, which are not only unpleasant, but carry disease. Broken fences meant that children in the neighborhood would have had easy access to that swimming pool, which is a violation of state law and a potentially fatal hazard had a young child wandered over unsuspectingly. Also, tall grass in front of a property can hide many possible pests, including snakes. Finally, homes that are not properly maintained could pose other health and safety risks, including natural gas leaks and fires.

In some cases, banks have evaded responsibility for this mess by not legally transferring ownership of the properties back to the bank itself. That is, the property legally stays in the name of the former owner, even though the bank has forced that person out through foreclosure proceedings. Thus, that owner remains legally responsible for paying any associated fines and penalties – even though he or she had no idea the property was still legally theirs.

It’s for this reason some states are exploring the enactment of zombie foreclosure legislation. For example, New York State Attorney General Eric Schneiderman announced his plan to introduce a bill that would compel banks and mortgage lenders to maintain vacant properties while they are in foreclosure. Banks could face substantial fines for failure to comply. The law would also require lenders to inform homeowners they are allowed to stay in their home until a judge orders them out.

Homeowners too often simply move out at the first notice of foreclosure, not realizing they don’t have to do so and that, if the foreclosure takes years to process, they will be on the hook for any property taxes, homeowners’ association fees and code violations racked up in the meantime. That’s why it’s important to consult with a foreclosure defense lawyer early on, to explore all available options.

Lawmakers in New York tried to pass a similar measure last year, but failed.

RealtyTrac reports New York actually comes in third in terms of the number of “zombie foreclosures.” New Jersey is No. 2. Florida is No. 1.

If you’re battling foreclosure or debt collection in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Tuesday at 6 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.

Additional Resources:
Wells Fargo racks up $57,000 fine on 2011 foreclosure, Feb. 17, 2015, By Paul Brinkmann, Orlando Sentinel
More Blog Entries:
Florida’s Foreclosure Law Stripping Homeowners of Property Rights, Sept. 20, 2015, Miami Foreclosure Lawyer Blog