Foreclosure blight now subject to $1,000 fines

Effective yesterday, local governments in California have the authority to levy fines of up to $1,000 per day against banks and lenders who fail to maintain foreclosed properties. Will governments enforce the law? Good question. Politicians certainly complain about the blight of foreclosure and how it hurts neighborhoods. Now it is their turn to prevent said blight.

The law signed yesterday by Gov. Arnold Schwarzenegger  provides for fines of up to $1,000 per day per violation against property owners who fail to keep up properties. Specifically, failure to maintain a property includes "permitting excessive foliage growth that diminishes the value of surrounding properties, failing to take action to prevent trespassers or squatters from remaining on the property, or failing to take action to prevent mosquito larva from growing in standing water."

You can read the relevant section of the law by clicking below.
Photo Credit: Los Angeles Times
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.

12.Requires a legal owner to maintain vacant, residential
             real property purchased by that owner at a foreclosure 
             sale or acquired by that owner through foreclosure under 
             a mortgage or deed of trust. 

             A.    Provides that a governmental entity may impose 
                civil fines and penalties of up to $1,000 per day per 
                violation on such a legal owner for failure to 
                maintain the property.

             B.    Requires any governmental entity that chooses to 
                impose fines and penalties pursuant to the bill to 
                give notice of the claimed violation, including a 
                description of the conditions giving rise to the 
                claim of violation, give the legal owner an 
                opportunity to remedy the violation at least 14 days 
                prior to imposing fines and penalties, and allow the 
                legal owner an opportunity to contest any fines and 
                penalties imposed.

             C.    Provides that "failure to maintain," for purposes 
                of this section, includes failure to adequately care 
                for the property, including, but not limited to, 
                permitting excessive foliage growth that diminishes 
                the value of surrounding properties, failing to take 
                action to prevent trespassers or squatters from 
                remaining on the property, or failing to take action 
                to prevent mosquito larva from growing in standing 
                water.

Comments

[Cal]

I think this puts further pressure on servicers to get properties sold sooner rather than later. It increases servicing costs (more maintenance) and will motivate servicers to minimize time they are holding onto the property.

[MyLessThanPrimeBeef]

failing to take action to prevent trespassers or squatters from remaining on the property,

--------------------

That would be the US governement. So, Arnold is going to fine Washington $1,000 a day?

[maxo]

This is the most asinine law ever. The poor smuck is walking away from his mortgage because he cannot afford it, but the city will have the power to put a lien on the property that you probably won't be able to discharge in foreclosure or even in bankruptcy just like a tax lien. This is just another form of city revenue. Nothing more, nothing less.

[chad]

"failing to take action to prevent trespassers or squatters from remaining on the property"

I guess that means we will see 10-foot-high chain link fences surrounding foreclosed homes. I've seen them at least 2 houses in my neighborhood in the North SFV.

[It All Happens On The Margin]

Maxo,

I'm as libertarian as the next guy, but this one is good for the surrounding homeowners and to Cal's point, is an incentive to the banks to move the property out of "shadow inventory" status (those are the numbers that shockg won't ever acknowledge).

We're back to the original point: if the loan-owner can't afford to keep the property up, they shouldn't have bought the place to begin with.

Presumably, if they are going through default, they are living in the property, right? So they're not making any payments at all for 6 freaking months. There should be enough dollars in there to keep the place up. Then when the sheriff comes a'knockin, the former loan-owner can fully walk away.

Most of the folks defaulting are doing it ruthlessly anyway...

What is the problem?

[Stanley]

a good start but both foreclosed homeowners and banks will likely not have the funds to pay the fines. would likely need an clause that allows for seizure and auction if the fines are not paid with 30 days or so as well as a hotline where neighbors can report problems, so those with the highest amount of complaints are handled (fined) first.

[KateNonymous]

This past weekend we looked at a house that had an incompletely drained pool. The water was clearly home to mosquito larvae. That's not in anyone's best interest, especially with West Nile in the area for several years now. This is a law that can protect the public good if it is properly enforced. I hope it works.

[CD]

Who will actually collect, who will knock on whose door?
That is just more lip service to reassure the masses that
there is someone in charge.This is a total anarchy moment, where the banks are caught with their pants down. The tone at CNBC just changed drastically today, they are having a hard time keeping up with their lies. Wall Street is getting a test of the consumers' wrath.

[Nick]

Maxo, the law clearly only applies to properties which the owner acquired through foreclosure, ie: lenders. So no need to worry about additional burdens on the people getting booted from the houses they couldn't afford.

I agree that there should be a hotline established, and there should be a seizure provision if the lender decides to delay payment indefinitely. These are good changes as they are, though, and hopefully will speed turnaround time for foreclosed properties. Anything to speed up the correction, and get as close to rational property values as possible before the morons in Congress take another whack at killing housing affordability.

[tew]

Cal is right - this could motivate banks to get rid of REO faster. That will mean bigger price reductions. However, we don't know how much this new law will really be enforced. It's likely that in practice it will only be enforced in the worst cases - the local governments don't have the resources and they also don't want to prod banks to accelerate dumping.

[Ace]

Good idea but it will take 5 years before the government comes up with a plan and hires the people to actually issue the fines.

[Roger Ramjet]

This is great. The banks are into fee's, fee's, fee's. Great, now it is my turn. Cheap banks, go for it! I love it. $1000 a day. I wanna be a volunter to help enforce this............yea yea yea

[Uncle Billy Went to Washington]

I'll go enforce this law if they pay us 30% of the fines collected.

[Laker]

As I mentioned before, I've seen many REO houses that are listed with "wishing prices" by banks that are on the market for a year and more.

So taking this $1000 per day fine times 365 days makes it $365,000 per blighted foreclosed house with a green pool. In many cases it will mean bank better donate the house and not hold/sell it, since not only it will lose money doing so, it will actually have to pay someone to take it...

yeah right...if only there would be someone to enforce it...
It is much easier to give speeding tickets, parking tickets, and newly designed tickets for holding a cell phone while driving...you can still sms...

[J_in_LA]

I applaud the legislators' efforts, but this is pretty unenforceable. What police division chief is going to send his uniforms out to cite houses that haven't been kept up properly? This falls into the same category as the jaywalking law.

[Dougmc]

There probably won't be any "seizures" for non-compliance. The fine will be filed on the land records and will sit there until the owner sells or re-finances, at which time it must be paid off (or the transaction won't go through).

Cities already assess owners of vacant lots for weed abatement and trash removal. First they send a notice to remedy the situation. If the owner doesn't act, the city does the work (or contracts it out), files a notice of the amount due on the public land records and waits for the owner to sell or re-finance.

[LeftLA]

Kate: You have to keep water in a pool, but cover it with plastic and a wood frame, like HUD does. If you drain the pool, it will pop out of the ground, which is a bigger mess.

[Scott McIntosh]

Last time Peter wrote about this I mentioned that this would be a good idea to force banks to maintain the properties and not let them go to S@%t. This will only give the banks more motivation to sell them quickly because they are not in the business to maintain homes. I am sure they don't want to have to start hiring gardners and handymen to keep their REO properties up. Plus as others mentioned this helps the near by homeonwers. Good move Arnold!

http://www.thewestwoodblog.com

[JK]

Disgusting that the people get laws passed and then have to worry about the law being enforced... what's the point?

[sandiegan]

$1,000/day fine for banks if foreclosed property is not kept up?

Buy Deere & Caterpillar stock now!

Banks are going to fire up the dozers and start scrapin'.

Cheaper than paying the fine.

[Laker]

check out this article:
http://online.wsj.com/article/SB121565255349741343.
html?mod=sphere_ts&mod=sphere_wd

or tiny url:
http://tinyurl.com/5vozqq

It seems the Fannie and Freddy are going to be nationalized...
Every US tax payer is going to be a home owner !

[Syscom3]

J_in_LA, ......... all cities have code enforcement officers that spend all day looking for things to write up.

It isnt hard for them to not notice the yard with brown grass, a big "for sale" sing and/or graffitti covered walls.

As for pools with stagnant water .... thats a major health issue that no community should tolerate.

[KateNonymous]

LeftLA, that's not what we're seeing. I've seen some empty pools (still in the ground, BTW) and I've seen some half-filled pools, but I haven't seen any that were covered. That's not the point anyhow.