It seems that not only are homeowners walking away from homes they can no longer afford, banks are too. While it’s not widely publicized, it is happening. And, it’s leaving a lot of homeowners and neighborhoods stuck with the fallout of community blight, crime and other problems common to foreclosure homes.

Bank Walkaways: When Banks Walk Away from Foreclosed Properties

Why are banks walking away from many foreclosure properties? The New York Times article, Banks Starting to Walk Away on Foreclosures, explains, stating:

Banks are quietly declining to take possession of properties at the end of the foreclosure process, most often because the cost of the ordeal — from legal fees to maintenance — exceeds the diminishing value of the real estate. . . . The so-called bank walkaways rarely mean relief for the property owners, caught unaware months after the fact, and often mean additional financial burdens and bureaucratic headaches.

Bank Walkaways Leave Homeowners on the Hook

As the article states, many homeowners who are foreclosed on are frustrated at this process because it still leaves them on the hook for the property. Many wonder why they were foreclosed on in the first place if they are to be left holding the bag when the banks walk away.

Bank Walkaways: Problems Caused

In addition to homeowner frustration, when banks walk away from foreclosed properties, they caused a myriad of problems, eg:

Property maintenance: As in who’s responsible for keeping up the property until it can be cleaned, cleared, repaired and/or demolished.

Vandalism: When foreclosure homes for sale dot the landscape, it invites crime, vandalism, graffiti, and a host of other problems for residents left behind.

Declining Property Values: Because of the above, the homeowners left behind face declining property values. This is particularly acute because when there’s no verifiable owner/lender to hold responsible for the property, the longer it sits. The longer a home sits empty, the more likely crime is to follow.

What’s the solution?

Foreclosure Cleaning Companies: A Good Start in Preventing Crime on Foreclosed Properties

One of the first things that need to be done when a foreclosed property falls in limbo like this is to get it properly cleaned and secured. This means boarding up windows and doors, maintaining the lawn, and removing junk and debris. A full-service foreclosure cleanup company can do all of this.

Copyright © 2009: Foreclosure Business News

Old-world standards are back in vogue for mortgage lenders, as discussed in the 3/15/09 LA Times article, Lending standards are back, and borrowers should know them.

The days of exotic loans that made things like 0% down payment and easy no-doc qualifications are over. Home loan lenders are back to the grind –  looking at things like income, savings patterns, amount of down payment and income documentation — all of which makes it harder for many to qualify for home loans.

But, given the bloodbath that the mortgage crisis has caused over the last few years, can anyon really be surprised. However, what does this mean for the overall housing industry in the short term? Four things primarily:

The Foreclosure Crisis & Tougher Lending Standards: 4 Things It Means for the Housing Market & Home Buyers

Good Credit Rocks! If you have good credit, a stable job and some savings, you are in a better position than ever to capitalize on the mess that is the foreclosure crisis.

Houses Sit Longer: As it’s more difficult than ever to get a mortgage, this means — in the short term — that houses will sit on the market longer.

Housing Market Stabilization: Once we all get used to the “new” (old) mortgage standards, it will stabilize the housing market because it means only those who are truly qualified (eg, job stabilization, good credit, come with down payments, etc.) will be buying homes.

Lock Out Many Would-Be Homeowners: Unfortunately, what this also means is that many would-be homeowners may never own a home — or, it may take years as they clean up bad credit, save a down payment, establish a healthy savings pattern, stabilize their employment history, etc.

But really, is this a bad thing?

Copyright © 2009: Foreclosure Business News

As the foreclosure crisis deepens and more and more homes stay unoccupied for longer periods of time, municipalities, city officials and HOAs are starting to hold lenders — who the properties revert to when it is foreclosed on — responsible for the upkeep and maintenance until they can be resold or rented. They are doing this because, as the Newsweek article Dirty Deeds cites:

Orphaned properties quickly fall into disrepair, the deterioration sometimes hastened by vandals who trash the interiors, lighting fires and ripping out wiring and pipes to sell for scrap. Squatters or drug dealers may move in. . . . The impact goes far beyond the defaulting homeowner, as neighbors and entire communities confront a spreading blight.  

Eventually, whoever takes over the property oftentimes call a foreclosure cleaning or junk hauling company to clean up the property and get it ready for market (ie, to be sold or rented) again.