This is a new concept I was not aware of. I know borrowers default on loans by simply walking away from the property. After that the bank usually forecloses. I guess banks are being creative and want to avoid further costs on underwater properties so they also walk away and don’t complete the foreclosure process.
I am not sure who owns the property at that point. I would think the lien still exists so the bank would still be held liable until it is re-sold but I am not sure. This is happening and we can only see how it plays out.
A new type of property is adding to neighborhood blight: the bank walkaway.
Research to be released Thursday, the first of its kind locally, identifies 1,896 “red flag” homes inChicago — most of them are in distressed African-American neighborhoods — that appear to have been abandoned by mortgage servicers during the foreclosure process, the Woodstock Institute found.
Abandoned foreclosures are increasing as mortgage investors determine that, at sale, they can’t recoup the costs of foreclosing, securing, maintaining and marketing a home, and they sometimes aren’t completing foreclosure actions. The property, by then usually vacant, becomes another eyesore in limbo along blocks where faded signs still announce block clubs.
“The steward relationship between the servicer and the property is broken, particularly in these hard-hit communities,” said Geoff Smith, senior vice president of Woodstock, a Chicago-based research and advocacy group. “The role of the servicer is to be the person in charge of that property’s disposition. You’re seeing situations where servicers are not living up to that standard.”
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