More Mortgage Meltdown

In January, Buffalo's mortgage foreclosure crisis hit the national newstands via a cover story in Business Week. I wrote about it here - Dirty Deeds & Toxic Title.

The problem of course is a total twister, some legal slight of hand and a sadder than sad housing market that has slipped to zero in some sections of the city. What happens when the bank initiates a foreclosure proceeding and - learning that the house has become a liability and has lost its asset value - never takes title, thus stranding the unwitting former owner with future liability for house that's no longer occupied and worth, most probably nothing. Strange, but true.

Well, I learned today from former Buffalo NY housing activist Richard Kern - now 'exiled' and living in Minneapolis - that the City of Buffalo is suing 36 financial and lending institutions in part to cover the cost of demolitions that it incurs when the 'bank' doesn't complete the foreclosure and leaves everyone hanging.

I've archived the 96 page Summons and Complaint - 'Buffalo & Brown v. 36'. I'll be following the case and tracking responding papers.

I wouldn't be surprised if this isn't an NPR or New York Times story in the making. Should be interesting.
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Anonymous said...

This should be put under the broad heading of: Truth Is Stranger Than Fiction.

But, is Buffalo cutting off its nose to spite its face? How will this effect mortgage aquisition for buyers trying to come into distressed neighborhoods? Is'nt this just an invitation to banmks to secretly redline the entire City of Buffalo?

Anonymous said...

Buffalo is not cutting off anything. Banks have to lend. Read the Community Reinvestment Act, son.

Anonymous said...

In the past some banks lent money on houses that had no asset value, and then seemed to be surprised when they went to foreclose and actually looked at it. That's on them.

Does this fall under the "just say okay so we can close" school of thought, or something else?

"Something else" could be the buyers on the cheap that immediately get mortgage/home equity loans based on the "assessed value" and then walk away.