Despite the nascent recovery in the U.S. housing market, thousands of homes still sit vacant in highly distressed markets. But according to CNBC, despite their appearance, not all of these homes are foreclosures. Many are still owned by borrowers — whether they know it or not.
Early last year, the nation’s five largest mortgage servicers signed a settlement over “robo-signing” foreclosure abuses. The deal resulted in thousands of properties being released from their liens, with many more to come.
Additionally, some banks are deciding that in some judicial foreclosure states—like New York—it’s more lucrative to walk away from distressed homes.
“What we’re finding in those neighborhoods is in judicial states [where a foreclosure case has to go before a judge], banks are making a decision that it’s going to take two years to complete this foreclosure, and increasingly cities are enforcing things on codes and vacant buildings,” Ed Jacob, executive director of Neighborhood Housing Services of Chicago, told CNBC. “Banks are looking at what the residual values will be and then the costs they will incur and essentially saying it’s not worth it for us to go through the entire foreclosure process.”
While this may seem like welcome news for borrowers, those who walked before the bank mailed the notice of its plans to abandon the property may have no idea that they still own their homes — or that they are liable for upkeep and property taxes.
“Does the bank rep think people are sophisticated enough to know the difference? They get a notice from a bank … this is complicated stuff,” Jacob said. “They don’t know if the sheriff will be out in 30 days. In some cases they probably stopped opening the letters from the bank. Some homeowners have fatigue.” [CNBC] —Christopher Cameron