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More Banks Walking Away From Foreclosures

Cities across the country say they are seeing a disturbing new practice when it comes to foreclosures - more and more, banks are opting not to take possession of foreclosed properties because the costs of maintenance, repairs, and legal fees outweigh the still-declining value of the property.
According to a _""New York Times"":http://www.nytimes.com/2009/03/30/us/30walkaway.htmlxpagewanted=1&th&emc=th_ report published over the weekend, these bank walkaways, as they are being called, are spreading through cities across the nation, from Jacksonville, Florida, to South Bend, Indiana, and Kansas City, Missouri.
In Buffalo, New York, the _Times _reports that the problem has reached ""epidemic"" proportions in recent months. In fact, the city of Buffalo has brought a lawsuit against 37 different banks, the newspaper said, claiming they are responsible for the deterioration of more than 57 abandoned homes because they ""walked away"" from taking ownership of and maintaining the properties following foreclosure proceedings.
Kermit Lind, a clinical professor at the Cleveland-Marshall College of Law and an expert on foreclosure law, told the _Times_, ""It [bank walkaways] is what some of us think is the next wave of the crisis.""
According to the _Times_, experts suggest the bank walkaways are most visible in states where foreclosures are processed through the courts and therefore tend to be more transparent, but roughly half of the states allow foreclosures to proceed without court intervention, making it difficult to accurately count the number of bank walkaways in recent months.
While a walkaway may be the most cost-effective option for banks in today's market - given the fact that lenders can lose up to 50 percent of their investment in a foreclosure - it offers little assistance to the homeowners, who are still on the title and therefore legally responsible for the property's upkeep under city ordinances. In addition, the homeowner is usually unaware of the bank's decision not to repossess the home until after the home has already been sitting vacant, leaving it vulnerable to vandalism and contributing to neighborhood blight.
Larry Rothenberg, a lawyer for creditors' rights firm Weltman, Weinberg & Reis, explained to the _Times_, ""Oftentimes when the foreclosure starts out, it’s a viable property, but by the time it gets to a sheriff’s sale, it might not have enough value to justify further expense. We’ve always had cases where property was vandalized or lost value, but they were rare compared to these times.""

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.

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