Banks turn to demolition of foreclosed properties to ease housing-market pressures

Demolition: Four years into this city’s housing crisis, it has often become cheaper for banks to give away a home and pay to demolish it than continue to hold on. And places across the country are watching. Click on the image to enlarge.

Brady Dennis
The Washington Post

Cleveland — The sight of excavators tearing down vacant buildings has become common in this foreclosure-ravaged city, where the housing crisis hit early and hard. But the story behind the recent wave of demolitions is novel — and cities around the country are taking notice.

A handful of the nation’s largest banks have begun giving away scores of properties that are abandoned or otherwise at risk of languishing indefinitely and further dragging down already depressed neighborhoods.

The banks have even been footing the bill for the demolitions — as much as $7,500 a pop. Four years into the housing crisis, the ongoing expense of upkeep and taxes, along with costly code violations and the price of marketing the properties, has saddled banks with a heavy burden. It often has become cheaper to knock down decaying homes no one wants.

The demolitions in some cases have paved the way for community gardens, church additions and parking lots. Even when the result is an empty lot, it can be one less pockmark. While some widespread demolitions could risk hollowing out the urban core of struggling cities such as Cleveland, advocates say that the homes being targeted are already unsalvageable and that the bulldozers are merely “burying the dead.”…

…The efforts have led other states to pursue similar laws to deal with their own foreclosure epidemics. New York passed a comparable measure this summer. Similar legislation is in the works in Georgia, Philadelphia and elsewhere…

…The donations keep coming, and not just in Cleveland.

At the end of August, the nation’s banks, along with Fannie Mae and Freddie Mac, had an inventory of more than 816,000 foreclosed properties on their books waiting for a buyer, according to RealtyTrac.  [emphasis CAJ] An additional 800,000 are working their way through the foreclosure process.

At Wells Fargo, Smith said, about a dozen asset managers “scrub these portfolios weekly” in cities such as Chicago and Milwaukee, looking for possible donations.

Rebecca Mairone, national mortgage outreach executive for Bank of America, said the company is expanding its donation programs to nearly a dozen cities, including Detroit and Chicago.

“It does balance the bank’s best interest with the community’s best interest,” she said…

Read the entire article at The Washington Post.

H/T The Freeman Magazine on Facebook.

Also at the Post, Harrisburg, Pa., files for bankruptcy

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