Awaiting Foreclosure: Who Should Get It Fixed?

Posted on January 8th, 2008 by saman

Residential loans have made a long distance since the days of the Bailey Savings & Loan. It is not a neighborhood enterprise it once was, but instead a global, trillion-dollar, profit-oriented tangle that seems more interested in their short time achievements than about the very neighborhoods it finances and to an extent, victimizes.

Since many years, lenders have been reaping the proceeds of stated-income; zero-down; teaser-rate loans. For an initial few years, their gamble did yield, but not without the sudden inflation of market as a result of more money being dumped into the many neighborhoods across the country. However, now the financial feasibilities have swapped with the fantasies of the annual ten-times appreciation, and so the lenders want to restore some public sympathies with them. As foreclosure and default figures write new history, so does the long list of explanations lending industry comes up with.

Issues get really simmering when the foreclosed property lies inhabitable. Lenders blame the borrowers for the damage done to the property, while the borrowers, who are already in thousands of dollars worth of debt, are not able to provide finances for repairs. Such incidents usually result with borrowers politely circumventing any responsibility by pointing that the foreclosure sale is not yet complete.

The lenders would always cover up for the clause in the mortgage contract that stipulates on them the responsibility for repairing any structural damage or hazards. Authorities, when trying to fight the weakening effect of unoccupied, discarded homes, are often found pitched up against lenders county records, which effectively proves to be the dead end. Many of such abandoned homes are in a hazardous condition, replete with asbestos and lead-containing substances. Such properties often become the place for activities like personal injuries, assaults, arson, selling of drugs, rapes, and homicides. Even then, lenders seem to be at ease with the municipalities handling such properties that significantly affect public security. That singly is a big enough motivating factor for the industry to start maintaining such properties, as a lender may be holding more that one mortgages within the same locality.

Try imagining yourself lending money to a friend to buy a car. As part of the deal, you have the right seize the car if he does not make a payment. After years of making payments, your friend suddenly fails to continue. You would then initiate proceedings to take back the car. Though the car is not yours still, you find out that the car is so badly damaged; it needs thousands of dollars worth repair. It certainly does not seem just for you to have to finance the repair, or does it?

Similar situation occurs in the events of foreclosure in the mortgage industry. During the last few years, local authorities have been holding the lenders liable for property code violation, even when the lenders do not yet own the property. Such practices are growing so widespread in some cities, that complete blocks of abandoned and dilapidated homes have made the mortgage industry their scapegoat, while the borrowers are allowed to get away with any liability for their self-created dilapidated homes. Those who are directly responsible for having created such hazards must be brought to justice, and not the unwary mortgage companies and loan providers who do not even hold ownership to the ruined property.

As seen from both angles, the issue is not just to provide any one side with concessions so as to uplift its status. Rather what is required is a better system of jurisdiction in which both parties get a fair chance to come up with relevant issues against each other. However, the current system do favor the industry in many ways; the small concessions it is giving to the borrowers can in no way account for the maze of legal work and market risk the industry exposes the borrowers to. However, it still remains important to see a more balanced picture.