In Richmond, Foreclosed Homes Breed a New Kind of Problem

By William Harless, New York Times

When Deborah Huey was about to show two empty units of an apartment building she managed to a prospective tenant earlier this year, the deal was scuttled by views of a dilapidated, empty house across the street. 
“ ‘Your property was fine,’ ” Ms. Huey recalls the client saying, “ ‘But that’s just trouble waiting to happen. I can’t bring my grandchildren down here.’ ” 
Since September, Richmond has vowed to crack down on banks that have neglected to clean up foreclosed properties, which have become more of an issue since the housing crisis began in 2008. 
Neglected houses are not just eyesores; Richmond residents said they increased the risk of crime, squatters and fires. 
Yet city officials are being frustrated in their search for the financial institutions or people who are responsible for many of the city’s foreclosed and preforeclosure properties. Determining whom to hold accountable often takes so long that properties continue to decay and create problems in neighborhoods. 
In September, Police Chief Chris Magnus said that banks often tried to conceal their ownership in less-affluent areas. Bank officials denied that, and after discussions with some of the financial institutions, the chief modified his comments, saying that there may have been anecdotal cases in which ownership was obscured. 
Since 2008, when Richmond enacted an ordinance that fined banks $1,000 a day for foreclosed properties with code violations, the city has issued more than $1.8 million in fines to property owners of foreclosed houses. Yet only about $550,800 of that has been paid, according to the city’s finance department. 
Mayor Gayle McLaughlin wants to make it easier for the city to seize blighted properties. 
“It would show these banks that they can’t simply do whatever they want, that the city means business about taking care of its neighborhoods, and it doesn’t want these houses and these properties lying vacant and creating opportunities for blight and crime,” Ms. McLaughlin said. 
In the case of the house facing Ms. Huey’s apartment, which was in preforeclosure as of September, city officers struggled for months to locate the owner. Tim Higares, the city’s code enforcement manager, said that in June code officers had contacted a lawyer for the estate of the house’s deceased owner, who referred them to another lawyer. 
That lawyer referred code officers to Select Portfolio Servicing Inc., in Salt Lake City. A notice of sale filed with the county clerk’s office in September stated that the contact was the Quality Loan Service Corp. in San Diego. 
Neither company responded to the city until the week of Oct. 23, when Quality Loan Service informed the city that the building had been sold to a company in Texas, according to Mr. Higares. Neither Select Portfolio Servicing nor Quality Loan Service returned calls for comment. 
Billy Owens, president of the California Association of Code Enforcement Officers, said that financial institutions could be slow about putting their names on the title of a foreclosed property. 
“After the owner gives up possession,” Mr. Owens said, “it can take up to six months, and sometimes even longer, for the new owner of record to get recorded.” 
In the meantime, he added, “the banks and loan servicers are putting the responsibility of maintaining the house on the local jurisdiction.” 
But it is difficult to determine whether a bank is responsible for the upkeep of a foreclosed property or a preforeclosure home. 
The owners of at least 38 properties were fined the maximum $30,000 under the Richmond ordinance from 2009 to Oct. 13, 2011, city records show. 
ReconTrust Company, a subsidiary of Bank of America, is listed as responsible for 10 of the 38 properties. Mr. Higares said that he was not certain whether ReconTrust owned the 10 properties, but that after searching property records, code enforcement officers had determined that the company was at least acting as the agent for the owners. 
Jumana Bauwens, a Bank of America spokeswoman, said that the company had at some point collected mortgage payments for 17 properties whose owners were fined. Ms. Bauwens said she could confirm that only five were ever owned by the bank. She added that at least one house whose owner was fined was never foreclosed. 
Ms. Bauwens said in an e-mail that Bank of America would make sure that properties it owned or serviced were inspected and that any necessary maintenance was completed. “Bank of America is committed to maintain properties to neighborhood standards,” she said. “When we learn that a property is not being maintained, we take immediate action to remedy the situation.” 
Bank of America is not the only financial institution facing city scrutiny. 
Wells Fargo Bank either owned or was the agent for the owners of five foreclosed properties that drew $150,000 in fines from 2009 to 2011, according to city records and e-mail interviews. But Holly Rockwood, a Wells Fargo spokeswoman, said that the bank was responsible for only one of the properties. 
For the other four, Ms. Rockwood said, Wells Fargo acted as a trustee and had no responsibility for maintaining the properties. Nevertheless, she said the company had helped the city identify the companies responsible for them. 
Diana Stauffer, regional mortgage servicing director for Wells Fargo in California, explained that about 16 months pass between a delinquent payment and foreclosure. During that time, Ms. Stauffer said, Wells Fargo cannot legally make repairs unless the owner allows it. 
She added that it would not make sense to let the properties deteriorate. “Ultimately they will sell for less if they’re in bad shape,” she said. 
Deutsche Bank was listed in city documents as associated with five houses whose owners were fined a total of $115,000 in 2009. John Gallagher, a spokesman for Deutsche Bank, said the bank acted as an administrator of the trust for the residential mortgage-backed securities behind the mortgages, not as a servicer. 
Mr. Gallagher said the properties listed under the bank were legally required to be maintained by a loan servicer. The servicer for four of the five houses, he said, was American Home Mortgage Servicing Inc. 
Philippa Brown, a spokeswoman for American Home Mortgage Servicing, said that the company was indeed the servicer and that it did not want to leave the houses in a state of disrepair. 
“The longer you leave them in disrepair, the higher the cost is to repair them,” Ms. Brown said. 
She added that since 2009, “our processes and our monitoring of the properties that we service has become a lot more strict and thorough.” 
After Chief Magnus’s criticism in September — at a community meeting, he said that in “neighborhoods where the properties are already severely distressed or are downright public health and safety hazards, many banks do everything they can to obscure who the owner is” — Wells Fargo sought to mend fences with the city. 
Wells Fargo representatives gave the city the name of a person to contact about blighted properties that code enforcement officers believed might be affiliated with the bank, Ms. Stauffer said. 
In September, Bill Lindsay, Richmond’s city manager, wrote a memo to the city, saying Wells Fargo was “extremely helpful” and willing to work with the city. He added, “Wells Fargo is the only bank that has reached out to the city in this way.” 
Chief Magnus said Bank of America had also made calls to the city. 
Meanwhile, the house across from Ms. Huey’s apartment building was in preforeclosure in September, with trash in the yard and graffiti on its walls. “I don’t know who boarded up the place,” Ms. Huey said. “But it’s a very raggedy job.”