HOUSE MONEY: Bill seeks to speed up time on foreclosure designation

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Proposed legislation co-authored by State Rep. Ed Clere, R-New Albany, would expedite the foreclosure process once a property owner has walked away from their land and left it to deteriorate. It would be an additional tool for officials to combat blighted lots like the one pictured above at 1930 Division St. in New Albany, he said. Staff photo by C.E. Branham
502 Culbertson Ave. C.E. Branham

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February 12, 2012

New Albany building commissioner said process, not time, is the real culprit

By DANIEL SUDDEATH Daniel.Suddeath@newsandtribune.com The News and Tribune Sun Feb 12, 2012, 05:03 AM EST

NEW ALBANY — Abandoned properties, housing foreclosures and blighted structures — most agree these are nuisances to any community, but finding one solution to remedy these problems isn’t likely.

So instead of looking for a single method to cure all ails, there has to be a variety of efforts to control foreclosures and property abandonment.

That’s according to State Rep. Ed Clere, R-New Albany, who has introduced multiple bills this Statehouse session addressing abandoned properties and vacant historic buildings.

Co-authored by Clere, House Bill 1238 unanimously passed the House and now is waiting approval from the State Senate. The bill would expedite the foreclosure process, which takes about five months to complete in Indiana. If approved, HB 1238 would allow a creditor in a residential mortgage to request the court find the property abandoned, though the debtor would still be allowed to prove the property is not vacant.

There’s also a three-month redemption period for debtors in Indiana after foreclosure has been declared.

Clere said the bill will help move along the foreclosure process once the property owner has walked away from their land and left it to deteriorate. It would be an additional tool for officials to combat blighted lots, he said.

“The problem of vacant and abandoned property is a complex problem, and this bill is an attempt to address one part of the problem,” Clere said.

While he credited Clere for his efforts to increase efficiency in dealing with abandoned houses, New Albany Building Commissioner David Brewer said current legislation doesn’t get to the root of the problem. The issues begin when the bank sends a letter to the debtor informing them they are at least 120 days late on their house payment, and that the lender will proceed with foreclosure.

But Brewer said typically the bank isn’t in a hurry to follow through on its threat.

“What we in the city are noticing is that some property owners will simply abandon the property when they receive said letter,” Brewer said. “At this point, the bank does not proceed with foreclosure proceedings, leaving the property in a state of limbo.”

Typically the bank will continue paying taxes to keep from losing the property, but does not maintain the land and house on the lot, Brewer continued.

When that situation comes to fruition, “the city has now become a property management company responsible for maintaining property, along with being responsible for all costs associated with maintaining that property,” Brewer said.

Eventually, lenders will perform an assessment of the property to determine whether the bank should seek judgment against the owner or foreclose on the land, and that can take up to two years, he continued. Usually bankers realize the property is no longer of value to them, and they should seek judgment against the owner who by that time is usually “long gone,” Brewer said.

But the story doesn’t end there.

Brewer said the next step in the process is usually to put property up for purchase at a tax sale. Normally, the land isn’t purchased during the tax sale because of liens on the property, so it goes into the ownership of the county.

“So after the immense amount of work put in by the city to not only maintain the property, but to also maintain public safety and improve quality of life for the surrounding properties, we have lost any and all ability to recoup the money invested in those goals from any government entity,” Brewer said.

Instead of focusing on the time it takes to foreclose a property, Brewer suggested legislators center on expediting the procedure to reach that goal. Foreclosure proceedings have nothing to do with whether or not the home is abandoned, Brewer said, as he criticized lenders for sending threatening letters to homeowners instead of working with them on their debt.

“Foreclosure proceedings deal with whether or not the property owner has made a payment or not, and whether or not they have defaulted on their loan,’” he said. “I think whether the building is abandoned or not does not relate to foreclosure proceedings.”

Clere acknowledged the need for a variety of tools to deal with vacant properties, and said he never touted HB 1238 as a cure-all for abandoned homes. He pointed to other legislation he’s offered including allowing municipalities to establish land banks, a measure that will be discussed through a state study committee this summer.

“I don’t disagree with [Brewer]; he’s right, there’s a need for more tools,” Clere said. “But that doesn’t mean that we shouldn’t try to continue to put every possible tool in the toolbox as the opportunity arises.”

Clere said he’s discussed the issue of vacant properties with New Albany leadership, and that he’s for looking at “every aspect of the problem.”

“With every vacant and abandoned property, there are numerous parties that have responsibility and we need to continue to make sure that we hold all responsible parties accountable for their role in the situation,” Clere said.

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HOUSE MONEY: Bill seeks to speed up time on foreclosure designation

New Albany building commissioner said process, not time, is the real culprit

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