Los Angeles approves program to fix up and sell bank-owned nuisance properties

Banks that own vacant, rundown houses in Los Angeles soon could lose control of those properties to the city, which wants to fix them up and sell them.

The move is the most drastic step in addressing the lingering effects of the housing crash, which flooded neighborhoods with foreclosed homes, many of which fell into disrepair and became makeshift garbage dumps or hubs of criminal activity.

The plan, approved by the Los Angeles City Council on Wednesday, would put vacant nuisance properties, starting with 25 owned by banks, under the control of a receiver — a court-appointed overseer who would hire contractors to handle the work and sales.

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Proceeds from the sales, not taxpayer dollars, would pay for that work, including the fees of private attorneys who would handle the legal paperwork.

“It offers an effective way to turn a property around quickly,” City Attorney Mike Feuer said. “This program costs nothing.”

Feuer’s office already can ask the courts to put vacant nuisance properties into receivership, but it rarely employs the process, which requires an attorney to petition a judge.

The new plan allows his office to farm that work out to private law firms, ramping up the number of property takeovers without additional city money being spent.

The city already requires banks to register foreclosed properties and can fine property owners for code-enforcement violations or take them to court.

Feuer’s predecessor, Carmen Trutanich, sued U.S. Bank and Deutsche Bank for failing to maintain foreclosed homes. But community groups say those measures have fallen short.

“If you drive around, you’re going to see vacant homes. Nothing has been done that I would say has showed any progress whatsoever,” said Joe Stringer, a retiree who lives on 78th Street in South Los Angeles and is a member of the advocacy group Alliance of Californians for Community Empowerment.

“You have people who just come and take these properties over. There’s prostitution, gambling, drinking, everything you don’t need,” he said.

Mortgage lender and servicer Ocwen, which Feuer’s office said owns five of the 25 listed homes, said it is investigating the properties.

“Ocwen’s policy is to maintain those properties in a safe condition, to make any necessary repairs, and to sell the property in a manner consistent with our guidelines,” the company said in a statement. “We look forward to cooperating with the city attorney to find the right solutions for these properties.”

The city lists two of the properties as being owned by Bank of America, but a bank spokesman said one is no longer owned by the bank. The other, he said, is being fixed up and transferred to another owner.

“Bank of America takes its role as servicer seriously in helping stabilize neighborhoods and preventing blight that may occur around vacant properties,” the bank said in a statement.

Feuer said he does not expect any difficulty in getting approval for receiverships because the properties have had longstanding problems that have not been resolved despite repeated city notices.

His office plans to force the sales with judges’ permission, with the owner receiving any proceeds once all program costs are deducted.

Feuer’s proposal now goes to Los Angeles Mayor Eric Garcetti for approval. If he signs off, the city attorney would be able to have outside firms start working on takeovers after 30 days.

Feuer said he plans to focus for now on bank-owned properties, but he eventually could expand the program to include any vacant nuisance property that owners are not maintaining properly.

Twitter: @jrkoren

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