An Outbreak of Oridinances: The Servicing Industry Is Working with Local Governments to Help Shape Sensible Ordinances for Dealing with a Growing Inventory of Vacant Properties

By Klein, Robert | Mortgage Banking, August 2008 | Go to article overview

An Outbreak of Oridinances: The Servicing Industry Is Working with Local Governments to Help Shape Sensible Ordinances for Dealing with a Growing Inventory of Vacant Properties


Klein, Robert, Mortgage Banking


As the volume of foreclosures increases across the country, so do the numbers of vacant properties. Vacancies aren't just a problem in major cities; they're a growing problem in suburban and rural communities as well.* Particularly in urban areas, vacant properties invite criminal activity, reduce surrounding property values, create safety hazards, deteriorate neighborhoods and stress the budgets of already-cash-strapped municipalities. * In 2005, before the current foreclosure crisis hit its stride, the National Vacant Properties Campaign (NVPC), Washington, D.C., reported more than 25,000 vacant properties and 11,000 abandoned properties in the city of Cleveland; 27,000 abandoned houses and 32,000 vacant lots in Philadelphia; and 42,000 vacant houses and 17,000 vacant lots in Baltimore. * Today, in declining metropolitan markets, vacant properties comprise between 5 percent and 10 percent of a city's housing stock, and in many cities that percentage is even higher.

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NVPC reported in 2005 that the abandoned property rate in St. Louis was 17 percent--one of the highest in the country. In the previous five years, the city had spent more than $15 million, or about $100 per household, to demolish vacant and abandoned properties.

The problem, and the cost, will only grow as foreclosures continue to increase. According to The Wall Street Journal, at the end of first-quarter 2008, foreclosures nationally were up nearly 29 percent over year-end 2007, and 140 percent over 2006.

Those of us in the mortgage services and field services industries don't have to refer to statistics to understand the scope of the problem. We have first-hand knowledge of the very real challenges of maintaining vacant properties and keeping them safe and secure.

As an industry, we've seen property portfolios grow in communities where we'd expect them to, and even in communities where we wouldn't have expected it. We've seen lower sale prices and properties remaining in inventory for longer periods.

We've seen more severe damage to properties than ever before--not only by vandals but also by desperate and frustrated homeowners. And we've experienced the criminal activities that occur in and around vacant properties--even those that are regularly inspected and maintained.

Because of what we've experienced, we can empathize with cities and understand their need to enact new vacant-property ordinances or strengthen those already on the books as they look to protect their communities from the ravages of blight.

Also because of what we've experienced in the field, as an industry we have much to offer cities across the country as they consider and enact vacant-property ordinances.

The servicing industry has experienced first-hand the challenges of complying with many city ordinances that were developed with the best of intentions, but that pose significant challenges to mortgage servicers and field servicers as we attempt to comply with them.

Many ordinances are vague or confusing; in certain instances they may conflict with other laws and regulations, and some actually have the potential to create consequences that are worse than the problem they are attempting to solve. As more ordinances take effect across the country, the challenges will continue to grow.

To address these challenges, mortgage servicers and field servicers have formed a National Vacant Property Registration Committee, comprised of approximately 20 individuals, under the umbrella of the Mortgage Bankers Association (MBA), to reach out to cities and offer our help, support and expertise.

In early July, the committee initiated weekly calls and invited interested industry representatives to offer their views and ask questions about ordinances under consideration and discuss specific issues with proposed or already enacted ordinances. …

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