Banks walk away from houses

Tom aka Rusty Rustbelt

The Un-foreclosure

What could be worse than a foreclosure? An Un-foreclosure (HT: Columbus Dispatch) also known as a dropped foreclosure or a bank walkaway.

Although exact statistics are hard to come by, the un-foreclosure is apparently become very common in Ohio, Michigan and Indiana. At some point the bank decides the economics of taking title do not justify further action, and walks away.

The General Accountability Office is investigating the problem, and believes as many as 50% of the drops are in these three states. Senator Sherrod Brown (D, Ohio) has gotten involved.

The mortgage servicer forecloses on the property and evicts the former owners, but then fails to take title to the property, leaving the property in limbo. No owner equals no property taxes paid, no insurance, and probably no maintenance. The property is left to rot, damaging the neighborhood. Ironically, due to the failure of the bank to take title, the former owner may still be on the hook for property taxes, and not know it.

The bad news just keeps on coming.