Foreclosure Trash Outs: More Property Preservation Services Needed

Government Accountability Office Wants More Foreclosure Trash Outs

As has been reported often, one of the major concerns caused by the overwhelming number of foreclosures in the past few years has been the impact on America's neighborhoods.

The large number of vacant homes that have yet to be processed as foreclosures - and thus, have not been cleaned, repaired and secured by a property preservation company - have created real difficulties for communities. Perhaps the biggest problem is that there are a number of abandoned properties where mortgage holders have simply walked away from houses when they feel they will never recoup their losses from them.

These homes are known as "bank walkaways," and, because the financial institution never notifies anyone they're abandoning the property, the house quickly falls into complete disrepair. Twenty U.S. areas account for 61 percent of the bank walkaways, with the most occurring in cities in Michigan, Ohio, and Florida.

Abandoned homes can devastate a neighborhood. They can cause spikes in crime, further depress property values, and become a safety hazard as well as an eyesore. Local governments can often be left holding the bag; they have to dig into already-strained public services budgets to either hire a mortgage field services company to take care of the home or pay to have the building in question demolished.

The Government Accountability Office has noticed this growing crisis and wants to do something about it. They want to require mortgage lenders to notify the local government, as well as the homeowner currently occupying the property, that they are walking away from the property.

Its new report calls for bank regulators, the Federal Reserve and Office of the Comptroller of the Currency, to issue that requirement; the GOA's blog on the matter can be seen at http://www.gao.gov/products/GAO-11-93?campaign=blog.

Many communities are already beginning to pass legislation requiring mortgage lenders to notify them when a property is going into foreclosure, to ensure that property preservation services and foreclosure trash outs will be performed.

The demand for foreclosure trash outs is certainly not going away any time soon; recently, Elizabeth Duke, governor of the Federal Reserve, recently informed Congress that the Reserve projects over 2 million foreclosures in 2011 and 2 million more in 2012, a similar foreclosure rate to the past two years. With an increased demand by local governments for the cleaning and securing of these properties, experts believe that property preservation will continue to be the biggest foreclosure business opportunity.


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