Two years after the Los Angeles City Council approved a foreclosure registry to track distressed bank-owned properties, city officials passed stricter rules to help clean up neglected bank-owned homes in Southern California.
In May 2010, the Los Angeles City Council passed the “Foreclosure Registry Program,” an ordinance which imposed registration and maintenance obligations on the owners of foreclosed properties. The ordinance required banks to register properties in the foreclosure process. Failure to comply with maintenance regulations could result in fines of $1,000 a day per code violation, and up to $100,000 per property annually. Banks would be charged an annual registration fee of $155 per property. Failure to sign up will result in a fine of $250 a day.
Two years later, however, no banks have been fined for violating the ordinance, even though the city is riddled with blighted bank-owned (REO) homes. Other cities with a stronger enforcement process have seen much better results from the ordinance. Riverside, for example, in its first year of enforcing the ordinance, issued $7 million in fines and collected $3 million in fees, amounting to approximately $2,700 in fines for every foreclosed property in the city.
As of May 2012, Los Angeles County had 10,816 properties in some state of foreclosure, according to RealtyTrac.
A new survey of 400 bank-owned properties in South LA conducted by the Alliance of Californians for Community Empowerment and Good Jobs LA found that about half of the properties were in a state of blight, and half of those in “severe” blight. The study — titled “Banks Make Bad Neighbors” — found 83 percent of the blighted properties were not registered with the city of Los Angeles under the Foreclosure Registry Program. Using RealtyTrac data, the report showed how banks are ignoring the ordinance and not paying the fines, according to the report.
“Call me naive, but I still find it shocking to hear a government official, in the United States, admit that a recently enacted law isn’t enforced,” wrote Los Angeles Times columnist Hector Tobar. “Why did the City Council pass it in the first place? For show? Is it governing that’s going on over in City Hall, or just theater?”
But a gapping loophole exists in LA’s foreclosure registry program. Under the 2010 ordinance, banks had the option of registering either with the city’s Foreclosure Registry Program or with an obscure Virginia-based company called Mortgage Electronic Registration System (MERS) which was created in 1995 by the nation’s biggest banks along with Fannie Mae and Freddie Mac to avoid paying real estate recording fees at the county-level nationwide.
Instead of registering with the city and paying the annual $155 fee, the banks have sidestepped the ordinance and registered for free with MERS, depriving the city of legally mandated fines from bank-induced blight.
But city officials found MERS wasn’t as helpful as they would have liked, so under the proposed change, banks would no longer be able to opt out of the city registry.
Readers what do you think? Should banks be forced to clean up their blighted foreclosure properties in Los Angeles? Or should they be allowed to continue to be LA slum lords?
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