Banks that made reckless home loans have been tiptoeing away from foreclosures in a tactic designed to cut their losses. The result: Orphaned, dilapidated homes dot the landscape from Kendall to Lake Worth.
There are no owners willing to claim and care for them.
A months-long Sun Sentinel investigation of property code violations involving abandoned homes uncovered case after case in which banks launched foreclosure lawsuits but then stalled or avoided taking ownership. In effect, the banks legally sidestepped responsibility for the empty homes, causing great harm to neighborhoods.
The real estate industry calls such properties "bank walkaways." They are no longer maintained by their legal owners, whether they were investors bailing out of unwise deals or families in financial ruin who decamped.
Nor are they being tended to by lenders, which have halted foreclosure proceedings because the remaining equity in the properties is deemed inadequate to cover the banks' costs to reclaim title and maintain, refurbish and sell them.
The practice has contributed to South Florida's foreclosure "limbo" problem in which thousands of vacant homes are stuck in unsettled court proceedings for years.
In Broward County, court officials estimate there are 8,000 dormant foreclosure cases in which there has been no movement for 120 days or more. In Palm Beach County, about 7,100 foreclosure actions show no activity in the past year and in Miami-Dade as many as 3,000 have had no movement in at least ten months.
"A lot of banks don't want the properties … that's the problem you find out," said John Phillips, a member of Fort Lauderdale's Unsafe Structures Board.
In mid-April, at the board's order, the city of Fort Lauderdale tore down a single-story house at 1604 NW 11th Court that had been in foreclosure for four years. Records show it had a dangerous pool and poorly constructed room additions that posed a "windstorm hazard."
CitiFinancial Services had won a ruling in its favor in the foreclosure case in September 2008 but never finished taking title to the property, saying it was trying to work out a loan modification with the owner.
"I'm going to vote to tear it down. I can tell you that right now, because it's gone on too long. I'm here to protect the people," board member Don Larson said last fall, when asked by the bank's attorney for a delay to repair the house.
Several months after the city ordered the house razed, the bank got a judge to dismiss the foreclosure suit altogether. That has left taxpayers with a demolition tab of about $16,000.
In its investigation, the Sun Sentinel visited vacant properties in foreclosure limbo where windows are broken or boarded, refuse is strewn on yards and swales, and doors are papered with official warnings to keep away because a house has "no sanitary facilities, no electrical service" or is "unfit for human occupancy."
In Greenacres in central Palm Beach County, one resident got so fed up with the condition of the abandoned vermin-ridden duplex attached to hers, and the lack of response from Bank of America, the mortgage servicer, that she stuck a sign on its window last September that read: "House full of RATS & BANK don't care." The foreclosure case, filed on behalf of another bank, had been ongoing for two years by then.
Afraid, Lynn McGee, 62, took to sleeping with the lights on. "I thought, if nothing else, I'm going to shame the bank," she said of her protest.
Within days, Bank of America promised to address "the report of vermin problems" and soon ended the foreclosure process by unloading the duplex at public auction for $28,000.
McGee, an eyeglass sales manager, remains bitter. Her insurer rejected her requests for thousands of dollars to replace insulation and kitchen counters and cabinets gnawed by rats from next door. McGee blames the bank for her woes.
"I'm mad," she said. "If I had the money to take them to court, I would."
Even South Florida's political leaders can prove powerless when trying to compel lenders to accept some degree of responsibility for a neglected and unoccupied home. Broward County Commissioner Kristin Jacobs lives on a street in Pompano Beach where Wells Fargo sued to foreclose on a home in June 2010.
Squatters moved in. Jacobs said she had to appeal to the city and the Broward Sheriff's Office for aid in getting the putrid pool covered — so no child would fall in — and the windows and doors bolted shut to discourage the squatters.
Meanwhile, the court docket shows the bank has done nothing to claim title to the property since December 2010.
"It's been a nightmare," Jacobs said. "The bank didn't take it back."
For banks, no obligation
South Florida attorney Ben Solomon represents condos and community associations in foreclosure cases. "We see bank delays every day. They really continually have been getting worse. More and more time is going by."
Nationwide, the average foreclosure takes 348 days to complete according to RealtyTrac, a foreclosure tracking firm. In Florida, it's 844 days.
The Sun Sentinel found many cases begun as far back as 2007 and 2008 that dragged on far longer, some coming to closure only in recent months.
The longer the foreclosure process, the more likely owners are to abandon their homes, according to a study issued last November by the U.S. Governmental Accountability Office.
Houses without inhabitants are a headache for everybody in the vicinity. "Vacant and unattended residential properties can attract crime, cause blight, and pose a threat to public safety," the GAO found.
In many cases, borrowers bailed when they couldn't or no longer wanted to meet their mortgage payments.
David Sieminski, who works at a leather goods shop in Key West, no longer tends to the Hollywood house, at 19th Avenue and Monroe Street, that he bought as a rental property for $427,143 in 2005. NAFH Bank, now known as Capital Bank, based in Coral Gables, moved to foreclose on the loan in May 2011.
The Sun Sentinel found a city notice taped to the front door warning that the grass must be cut, weeds pulled and recyclables properly disposed of. Piles of junk, including a bin of glass jars, littered the overgrown backyard.
Next door, an 83-year-old snowbird from Ohio is reluctant to hang her wash on the clothesline for fear rodents from the vacant house will scurry under the chain-link fence and crawl up her leg.
Reached by phone, Sieminski declined to comment, referring most questions to his attorney. Asked why he had stopped taking care of the home's exterior and yard, he said: "Why don't you make the mortgage payment and take care of it then?"
Under most conventional mortgages, once a homeowner has defaulted and a property is abandoned, banks have the right to go in and change the locks, secure the house and take steps to maintain it to preserve their investment.
But in Florida, unlike some other states, they are not obligated to. And they say they shouldn't be.
Lenders may be reluctant to intervene for fear the property may not be abandoned, but just vacant for a time. Owners could return and say they were out of town, or the place could be between tenants.
"Until we have title to a foreclosure, it's not our property," said Anthony DiMarco, Tallahassee-based lobbyist for the Florida Bankers Association. "In essence, we're trespassing."
Florida courts have been overwhelmed in recent years by the avalanche of foreclosures clogging the system. The processing of cases ground to a standstill for a time beginning in late 2010, over a scandal involving the improper verification of bank documents by so-called "robo signers." Individuals filing for bankruptcy also freezes the foreclosure process.
That all has contributed to the limbo problem.
But over the past few years, lenders also have been walking away from foreclosure actions involving homes with low market values, after their cool-headed calculation that the homes cannot resell for enough to offset the costs of foreclosing, repairing, maintaining and marketing them.
In other words, the banks have cut their losses.
"It's immoral if nothing else, what they're doing to evade their responsibility," said Raquel Diaz, code compliance manager in Lake Worth, where police say clusters of vacant homes have led to increased crime.
In some foreclosures, banks simply ask the court to drop the case.
In other instances, after winning foreclosure judgments, banks delay claiming title by canceling the resale of a property at public auction, sometimes numerous times. The sale is the crucial final step to a bank acknowledging ownership.
Legal experts say the auctions can be postponed if banks tell the judge the bank and homeowner are still trying to modify the loan or sell the property to a third party for less than the debt, in a so-called "short sale."
When there is no true likelihood of new loan terms or a short sale, the canceling of auctions can be beneficial for the banks but toxic for the neighborhoods affected.
"The tactic, commonly referred to as a 'bank walkaway,' allows lenders to obtain whatever insurance or accounting benefit is available by documenting the loss, but leaves them immune from responsibility for the damage caused by a vacant property," Frank Ford, senior vice president for research and development at the Cleveland, Ohio-based nonprofit Neighborhood Progress Inc., wrote in a 2010 Federal Reserve Board report on bank-owned real estate and vacant properties.
The practice has become common enough that theU.S. Treasury Departmentlast year issued a "guidance" notice to banks, advising them to walk away cautiously and to "consider the potential for reputation and litigation risk arising from their position as a prior mortgagee or service of a now-abandoned property."
The recommendation from the Obama Administration was also for banks to notify, or attempt to notify, the homeowner that the bank is no longer pursuing a foreclosure action and "the borrower may continue to occupy the property and … is obligated to maintain the property."
Many homeowners may not know that their lender has ceased foreclosure actions and that a property remains in their name and legally theirs.
"I live in Texas right now, and I don't know what happened with the house. The bankers don't call me any more," Maria Loa told the Sun Sentinel in a phone interview regarding the vacant Boynton Beach house at 151 NE 28th Court that is still titled to her and her husband, despite entering foreclosure in August 2010.
No action has been taken in the open case since November 2010, according to the court docket.
U.S. Sen. Sherrod Brown, D-Ohio, blasted the Treasury Department in a letter in January for implicitly approving of bank walkaways instead of requiring lenders to complete the foreclosure process and pay for the demolition of vacant, unsafe properties or donate them to cities or nonprofit groups.
"It is unrealistic to expect that homeowners will return to their homes if they only learn of their rights after they have left their home and the home has already been stripped bare," Brown wrote.
Certainly no one has returned to the abandoned duplex at 1501 NW Eighth Ave. in Fort Lauderdale.
In 2008, Bank of New York won a foreclosure judgment against Michael Pubien but still has not taken title to the property. So Pubien is still the owner and owes Fort Lauderdale more than $18,000 for fines and costs the city has incurred to board up windows and doors, mow the lawn and haul away trash at the building, which has become a vacant eyesore.
Pubien could not be located by the Sun Sentinel for comment. A Miami phone number for him listed in the court records has been disconnected.
An entry dated October 2010 in the case file states that Pubien and the bank "are continuing to be involved in loss mitigation." Sale of the property at public auction, canceled at least five times in the past, is now rescheduled for June.
Cities that try to persuade banks to tend to vacant limbo properties may find their efforts thwarted.
For more than three years, Paulina Vial, a Miramar code enforcement inspector, has tried without success to get the owners of a house at 1789 SW 82nd Terrace — and the bank foreclosing on it — to clean it up. The city has been paying to have the lawn mowed.
Bank of America denies owning the abandoned property. It launched foreclosure proceedings against the owners, Edward and Kiva Ryan, in November 2007.
A Broward Circuit judge sided with the bank and issued a foreclosure judgment in 2009, but the property was never offered for sale at auction, leaving it in the name of the Ryans, who moved out and haven't responded to the city's public notices.
Kiva Ryan's attorney in the foreclosure matter, Craig Sackler, said the last he knew the couple were divorcing and his client had moved out of state. He was unaware of the status of the property.
"Unless there's a foreclosure sale, you're not foreclosed on. You still own the property," he said.
Over the years, Vial has found the lawn overgrown, windows broken and the yard littered with trash, including an old mattress.
Her files document her repeated, frustrating attempts to deal with the bank. She left messages in October 2009. "Negative results," her records state. A notation dated March 9, 2011 says Bank of America "is still trying to locate mortgage."
In August 2011, Vial emailed the bank with a copy of the 2009 foreclosure judgment, telling the bank the house had accrued $16,150 in city fines and fees.
"Michele at the bank left a voice mail stating she needs more time to research the property," Vial's notes state.
Vial wrote the bank again in September saying "the grass is about 3-4 feet tall."
"The bank says they don't own it," Vial said in an interview. "They basically said they have no record of it anymore. It's no longer theirs."
So whose is it?
"They're not able to tell me much," Vial said. "I'm stuck."
So for the foreseeable future are Miramar taxpayers.