Foreclosed is Forewarned

By Erik Hare

If you are a regular reader, you are probably aware that our own Teresa Boardman has become a local leader in identifying a major problem with foreclosures; banks are simply not equipped to manage or sell the properties that they suddenly find themselves in possession of.  This is not unique to Saint Paul, but it is clear that the best solutions are likely to come from people dealing with it “on the ground”.  As a consultant to community based nonprofits, I’d like to take up Teresa’s challenge and see if I can suggest a few solutions. 

Bank ownership becomes a problem for us when properties sit empty for a very long time.   The issue is that the growing inventory of empty houses is only going to become larger as there are more foreclosures, and that these are unlikely to be maintained by large, distant companies with too much on their plate.  The 1,265 houses listed as Registered Vacant Properties are, generally, only those that were required to be listed due to being empty for a year, occupied by squatters, or some unrelated problem.  They are only the tip of the iceberg, since ever day more foreclosures are boarded up and left to fester.

My first response is that the City of Saint Paul needs to get involved in this process and declare an emergency.  Understandably, many people will not see the involvement of bureaucracy as a way of speeding things up, but I have to point out that when a house is actually burning our Fire Department moves pretty quickly.  We need to have that sense of urgency right now before things become worse.

Some kind of centralized office needs to start cataloguing houses that have gone into foreclosure and contacting the banks that own them.  This does not have to be the City necessarily, as it could be farmed out to a nonprofit that has experience in the matter.  Precise data on foreclosures appears to be difficult to get right now, meaning that we haven’t even started to get a handle on what we have to deal with.

To keep the properties in good condition and spur banks to unload them, I think that the city needs to explain our local ordinances on shoveling, lawn mowing, et cetera along with the penalties for not doing so.  But we can also offer them a service, for a fee, to maintain the properties and perhaps keep the utilities on.  The idea is to help them  keep things up and ready to sell, which is in everyone’s best interests.

If these things don’t happen?  The City has what we call “Summary Abatement”, which is when a property is declared a hazard and the building torn down at the owner’s expense.  Granted, we don’t want to do this, but these property owners need to understand that not following local ordinances will have dire consequences.  A well- worded resolution by the Council that they will speed up the process when buildings are owned by unresponsive institutions could instill a sense of urgency.

You may be thinking, “This sounds like a giant protection racket!”  It’s true that you can almost hear Don Corleone saying, “I’d like to make you an offer that would be in your best interest to not refuse.  We help you take care of things and move it along, or else we can’t exactly guarantee the safety of your building.”  But that’s far from what I am proposing.  The truth is that if we don’t get a handle on these properties up front, they will end up in a bad situation later.  If we cooperate now and find out what it takes to get the banks to live up to our community’s laws and standards, we should be able to do it without having to apply nothing but force later on. If the banks can handle this on their own, that’s perfectly fine, too.

Buyers of homes will also need assistance.  It’s difficult to impossible to get an FHA loan on a home that has been foreclosed, especially if the utilities are disconnected.  The City can provide home loans through its bonding authority to people who otherwise are FHA qualified.  Some of these can even be purchase and renovation loans, with some money for repairs, such as the one that I took out through the city in 1992 to buy my house.  That loan was difficult and bureaucratic to arrange, so I’d want some major changes, but the principle is that it can be done.

There will also be some homes that will still fall through the cracks, however.  While it’s best to get homeowners into them, many will either require too much work or otherwise not be desirable.  That’s where local Community Development Corporations (CDC) come into play, buying up homes or even whole blocks for redevelopment.  Identifying these opportunities and helping to find money, public and private, to make them happen can be a last resort.  We want these houses to stay a part of our community if it is at all reasonable to keep them.

What is important, however, is that we recognize that this is an emergency and bring together the banks, government, homeowners, and CDCs that can make things better before it becomes a very serious problem.  One problem property on a block is a problem, and several problem properties on one block is a slum.  Once you have whole blocks full of nothing but problem properties you have a serious public health and safety threat.  We have to act before it comes to that.

Getting everything we need to prevent that into one office that can take immediate action is the best way to keep Saint Paul the hometown that we love to live in.  Teresa has helped to get us talking about it, and that’s really important.  I’d like to see her alarm met with dramatic action to take care of it before it gets worse.