For Lenders, New Costs to Foreclose

American Banker (04/14/08) P. 1; Berry, Kate
Many municipalities--mainly in Southern California and the Midwest--are changing their approach to the foreclosure crisis, moving from efforts to help homeowners avoid foreclosure to making sure those who take control of foreclosed properties prevent them from falling into disrepair. Lenders and servicers in these areas are being hit with hefty fines for code violations in vacant homes; more than a dozen companies have been given 30 days to formulate rehabilitation plans for homes in St. Paul, Minn., for instance, before facing legal repercussions. In Chula Vista, Calif., meanwhile, a $70 fee has been imposed to register vacant properties; and some cities are levying fines up to $1,000 per day for code violations. Asset managers insist they are being hit with excessive fees, given that code violation notices initially are sent to high-ranking executives by mistake. Others point out that lenders do not make expensive repairs because servicing costs are rising dramatically. First Option Asset Management Services LLP asset manager Shelley Kaye notes, "The cities are being so proactive in attacking the lender, thinking we're the deep pockets."