Banks and other lenders who allow foreclosed residential properties to sit vacant will have to pay a fine of $1,000 a day up to a total of $100,000 if they allow them to become a blight on a neighborhood under an ordinance passed recently by the Los Angeles City Council.
"This ordinance is about keeping banks from seizing homes and then neglecting them to the point where they become magnets for trash, vermin and crime," said 13th District Los Angeles City Councilmember Eric Garcetti.
The recent wave of foreclosures hit many inner-city neighborhoods particularly hard, thanks in part to marketing efforts that focused on Latino-American and African-American homebuyers with offers of sub-prime mortgages. Sub-prime mortgages and other non-standard financing methods — so-called "exotic" loans — grew in popularity in the years prior to the current economic downturn. Sub-prime loans typically come with low initial interest rates, but often rise steadily in subsequent years, often going well beyond market standards. Many homeowners found themselves unable to keep up with rising monthly payments in recent years, which in turn led to a large numbers of foreclosures in inner-city neighborhoods. The trend has since grown to include standard mortgages and higher-priced homes, but the trail of foreclosed properties remains significant in many working- and middle-class sections of Los Angeles.
Garcetti said criminals sometimes move into foreclosed properties and use them for drug-dealing and other unlawful activities. He added that neglected swimming pools can become breeding grounds for mosquitoes and are dangerous for children, while yards overgrown with brush can pose a fire hazard.
The ordinance calls for the city to compile a registry of foreclosed properties and inform owners about requirements for keeping the property "clean and free from accumulation of debris, rubbish, garbage, trash, overgrown vegetation and other similar material."
City Attorney Carmen Trutanich said the Foreclosure Registry Program will serve as "a mechanism to protect residential neighborhoods from becoming blighted through the lack of adequate maintenance and security of abandoned properties as a result of the foreclosure crisis."
Banks will be charged an annual registration fee of $155 per property. Failure to sign up will result in a fine of $250 a day. Banks that fail to maintain foreclosed homes will be charged $1,000 per calendar day for each structure in violation of the city's regulations, not to exceed $100,000 per calendar year. Trutanich said that $100,000 is the maximum civil penalty authorized by the Civil Code for such cases.
Banks will have 30 days to correct the problem before being penalized.
Based on the budget approved by the council last week, the city is depending on the fees and fines to generate about $5 million in the coming fiscal year.
The city's unions have been pushing for the ordinance for months, in the hopes that it would help raise revenues and reduce layoffs.
A Coalition of Los Angeles Unions report said "banks helped create the budget crisis with toxic lending practices," and they now "need to help solve it."
Tania Cardoso, who identified herself as a lawyer who represents banks that have implemented foreclosures, offered another view.
"These banks are not responsible for the nuisance and the blight (caused by) people who have failed to pay, then left these units in disrepair," she said. "The banks — it is in their interest to keep that unit up because they'd like to resell. They have agents who are at all these properties...attempting to work with owners or tenants who refuse to allow them access to the property, who refuse to pay for gardeners, who, in fact, attempt to create further damage to these properties. When we're reviewing a house after it's been vacated, appliances have been taken out, plants have been removed, everything has been done to create a bigger problem for the banks," Cardoso added.
Photos by the L.A. Garment & Citizen.
Read more stories from the L.A. Garment & Citizen »
Leave a comment