Not Just Borrowers Walking Away Anymore

March 30, 2009 No Comments »

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Since the mortgage crisis got underway, the idea of walking away from your mortgage has been fairly commonplace.

But now banks and lenders are doing the same, putting burden back into the hands of those previously foreclosed on, according to a NY Times report.

One case, in South Bend, Indiana, tells of a woman who had her rental property foreclosed on, subsequently vandalized and looted, and eventually slated for a sheriff’s sale.

But without explanation, the sheriff’s sale was canceled, and a notice was sent to the property owner from the city, demanding that she resume maintenance on the property.

Of course, the city plans to demolish the home, an expense the homeowner will be liable for.

This is but one example of a growing problem hitting communities nationwide where property values, that were low to begin with, have sunk.

It doesn’t make sense for the mortgage holder to retain ownership, simply because the property is more of a liability than an asset, so banks and investors choose to write off the associated bad loans as losses rather than manage inventory deemed seemingly worthless.

Unfortunately, stagnating foreclosed properties have made matters worse in neighborhoods already grappling with record home price deprecation, leading to lawsuits against the banks.

As a result, a legal mediation process that brings together mortgage holders and homeowners in an attempt to settle the disputes is in the works, which would allow the owner to stay put while things get sorted out.

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