We learned a few important lessons about lenders during the foreclosure crisis. We also learned about just how touchy the real estate market can be.
For instance, the foreclosure ripple effect was especially evident: While the homeowners going through foreclosure certainly suffered the most, their immediate neighbors and communities were affected as well. Property values, already in a steep decline after the bust, were further depressed by their proximity to one or more bank-owned properties.
That downward pressure was not so much a consequence of the foreclosure itself. Rather, it was the result of the home falling into noticeable disrepair. Once the homeowners were gone, lawns grew wild, storm damage went untouched, vandals and squatters left the property a shambles -- it turned out that lenders made lousy landlords.
Some lenders and servicing companies just let the properties sit. Others made an effort to keep homeowners in the property for as long as possible. And others turned to the mortgage field services industry for assistance.
Mortgage field service companies specialize in the preservation of bank-owned properties. They mow lawns, cover pools, work with exterminators, replace broken windows -- they deal with all of the things that can turn a property from "vacant" to "abandoned." Too, in order to protect the servicing company's or bank's investment, these companies must make sure the home is secure, changing locks as necessary and working to evict residents as necessary.
It is the "as necessary" part that has landed at least one mortgage field servicing company in some serious hot water. The company found itself embroiled in a dispute with the Illinois Attorney General's office in September 2013 after the state received more than 200 complaints about the company's tactics. We'll explain more in our next post.
Source: Chicago Tribune, "Safeguard Properties' $1 million settlement will take time to disperse," Mary Ellen Podmolik, June 9, 2015