Here's an interesting story from our neighbors to the east....
The Journal Sentinel in Milwaukee has written an extensive article on lenders and loan servicers that initiate the foreclosure process, but never complete the Sheriff's sale, or, if the Sheriff's sale takes place, never record the sale. In these situations, the lender never takes title to the properties - because they are, for all intents and purposes, worthless. This leaves the property "abandoned" as most of the time the homebuyer has moved out, thinking that they had already lost the property (The foreclosure process in Wisconsin is different from the process in Minnesota).
In past downturns, there have always been a small number of properties that have been 'abandoned' both by the homebuyer and the lender. Could this downturn cause this previously-limited situation grow? Will the trend of securitization of mortgages that occurred in the past few years (securitization is the process of turning mortgages into securities that are then sold to investors) lead to more abandoned properties this time? (As the mortgage-investors, who have already lost 100% of their investment on a property, don't want to invest another dime to either take title, cover assessments, maintain or rehab the property)?
In the article, Jeannine Bruin, an executive director of mortgage communication with lender and servicer GMAC, gives this explanation:
“We do the cost-benefit analysis (for) the investor. Is he going to recoup any money for us to go through the whole process of foreclosing, fixing the property up, marketing it, selling it? Is anything coming back to that investor? If not, it’s best to just let the borrower keep ownership of the home.”
The Journal quotes Kathleen Day of the Center for Responsible Lending who says lenders are walking away in cities across the country. But no one has quantified the trend.
Please read the story... it's chock full of analysis and examples of why lenders and servicers abandon properties.
Then come on back and tell us if you're seeing anything like this in Minnesota? Any of our Realtor friends or lender partners seeing this happening? Perhaps in low-cost areas in the Twin Cities?
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