Major banks may give away discarded residences to cut losses

Negotiating for an exit strategy from the mortgage meltdown, representatives for a foreclosed properties servicer that works with major banks met Monday with Dayton city officials to discuss the abandoned properties.

How the early discussions will shake out is unknown, but a potential outcome includes transferring some properties clogging up bank balance sheets to a land bank or some other public entity, a move that occurred earlier this year in Chicago.

In May, Bank of America announced a collaboration with the city of Chicago and a community group to give away 150 vacant and abandoned properties in and around the city. A bank spokesman said the bank agreed to pay as much as $10,000 per home for demolition, according to the Chicago Sun-Times.

“Unfortunately, many homeowners faced with unemployment, underemployment and other economic hardships, have transitioned to alternative housing situations, and in many cases have walked away from their homes, leaving behind vacant and deteriorating properties that can cause neighborhood blight,” a Bank of America statement said in May.

“To be honest with you, I think we need to walk into this idea of banks donating properties with eyes wide open,” said Aaron Sorrell, the city’s planning director. Sorrell, however, said he believes the discussions are valuable, especially if there are financial incentives the banks are willing to provide to help bring severely deteriorated properties back onto the market.

“Everybody believes the finger pointing between the banks and the cities needs to end,” Sorrell said.

City sources said the representatives are from Safeguard Properties of Cleveland. Also in the meeting was James Rokakis, former Cuyahoga County treasurer who worked on foreclosure issues there. Spokeswoman for Safeguard Diane Fusco confirmed the discussions were under way.

Safeguard Properties describes itself as “the largest privately held mortgage field services company in the country,” with “services in 50 states, the Virgin Islands and Puerto Rico.”

Headquartered in Cleveland, the company was founded in 1990 by Robert Klein. He was in Dayton on Monday, Fusco said.

Safeguard “inspects and maintains defaulted and foreclosed properties for a wide range of clients in the mortgage industry, from local loan servicing companies to national publicly traded mortgage servicing corporations,” according to its website.

Sorrell said the next step is establishing a land bank in the county because large banks would prefer to work with a single entity.

Montgomery County Treasurer Carolyn Rice said she’s still working to organize a land bank that could manage abandoned properties. There’s as yet no firm date for a launch but it should be soon, she added.

In 2010, the state legislature approved legal language to give large counties power to take over vacant and abandoned properties. It expanded a previous law that applied only to Cuyahoga County and allows county treasurers to set up nonprofit corporations to acquire and manage abandoned properties that are a growing scourge on many neighborhoods. The Cuyahoga County Land Reutilization Corp. has secured tens of millions in federal Neighborhood Stabilization Funds to expand.

The city of Dayton, which has cut staff as it struggles with a budget deficit, estimates it has about 7,000 residential properties that are either two years behind on paying taxes or require lawns to be mowed by city forces.

Jim McCarthy, CEO of the Miami Valley Fair Housing Center, a nonprofit civil rights housing organization, said he’s encouraged by the discussions.

“Without knowing any details, I feel better having the city being in charge of abandoned properties rather than real estate investors who may not be concerned with community welfare and neighborhood stabilization,” he said.

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