House panel studying impact of 'toxic' properties

Lenders are often leaving properties abandoned.


Five bills dealing with the mortgage foreclosure crisis have been approved or are in the works in the Ohio House of Representatives. Here is a brief listing of some of their provisions and their current status.

House Bill 3

Places a six-month moratorium on foreclosures

Regulates companies that enforce mortgages

Requires a $750 foreclosure filing fee, part of which would go to establish foreclosure counseling programs.

Status: Approved by the House, awaiting hearings in the Senate Finance Committee

House Bill 9

Requires a landlord to provide notice to prospective and current renters if a foreclosure action if filed against the property.

Requires a landlord provide each tenant written notice 21 days before a sheriff's sale is scheduled.

Specifies that a rental agreement for a residential property that is sold in foreclosure converts to a month-to-month rental agreement.

Status: Approved by the House, awaiting hearing in the Senate Finance Committee

House Bill 306, Senate Bill 197

Requires mandatory mediation before a non-tax foreclosure case on an occupied residence could proceed.

Pays the costs of mediation by imposing a filing fee up to an additional $500.

Status: Under consideration by the House Housing and Urban Revitalization Committee.

House Bill 313, Senate Bill 188

Would expand a pilot land bank program, previously authorized only for Cuyahoga County to 28 other counties with populations greater than 100,000.

It would allow counties to establish non-profit land reutilization corporation to acquire properties and redevelop them to reduce blight and increase property values.

Status: Approved by the Local Government/Public Administration Committee, awaiting consideration by the House

House Bill 323

Requires plaintiffs in a foreclosure case to initiate a sheriff's sale within 60 days of a foreclosure judgment, or lose their lien on the property.

If a foreclosure sale does not happen and a homeowner does not redeem ownership, the property is seized by the county and transferred to a land bank, if one exists.

Would stay judgment in a foreclosure case until a probable nuisance property is abated by a filing plaintiff, and expands definitions and court powers related to nuisances.

Status: Under consideration by the House Housing and Urban Revitalization Committee.

For weeks, community leaders and housing experts from around the state have been making the drive to Columbus to testify in committee hearings about the damage being done in their communities by foreclosed, vacant and abandoned properties.

The Ohio House committee on Housing and Urban Revitalization, chaired by Rep. Mike Foley, D-Cleveland, has been working on a bill to address so-called bank walkaways, which occur when a lender forecloses on a loan but never takes custody of the property. Lately, observers say, lenders are sometimes not bothering to file a foreclosure at all. In either case, the property often languishes in a legal limbo with a “toxic title” hanging over it that is difficult for local governments or interested parties to deal with.

The resulting damage to homes, neighborhoods and communities has not only been devastating in Ohio’s urban cities, but also increasingly in suburban communities, witnesses said at a Dec. 2 hearing.

Angela Williams, community development manager for Kettering, testified on behalf of the First Suburbs Consortium of Dayton, which represents 13 communities in the region.

“Toxic titles combined with abandonment have led to homes becoming a blighting influence on the neighborhood and eventually a magnet for criminal activity,” Williams told the panel.

The houses, she said, are often broken into, vandalized, stripped of copper piping, aluminum siding and anything else of value.

“The longer the property sits abandoned, it becomes less valuable and more costly to abate,” Williams said. “Our cities and our member communities are forced to deal with these properties daily.”

Sally Martin, residential code enforcement officer in the Cleveland suburb of South Euclid, said foreclosures have devastated property values in her community and in suburbs across northeastern Ohio. The median housing value in 2000 was just under $107,000, she said, but “the average sale price now is in the low 70s.”

Martin blamed the slide on bank walkaways and showed slides of decrepit homes to illustrate.

“What are we to do?” she asked, looking at a home that had fallen into total disrepair.

Both Martin and Williams urged the committee to give them the tools to get control of abandoned properties before they do more damage. House Bill 323, sponsored by Rep. Dennis Murray, D-Sandusky, addresses bank walkaways by, among other things, requiring plaintiffs in a foreclosure case to initiate a sheriff’s sale within 60 days of a foreclosure judgment, or lose their lien on the property.

Thomas J. Fitzpatrick IV, an economist with the Federal Reserve Bank of Cleveland, said a study the bank recently did in Columbus estimated that vacant and abandoned homes reduced property values in 2006 alone by more than $100 million.

“Currently,” Fitzpatrick told the panel, “there is no effective and efficient tool concerned parties can use to address lienholder walkaways.”

Kermit Lind, a professor at Cleveland Marshall College of Law who testified at an earlier hearing, was more blunt.

“We’ve got a very ancient, arthritic system, which has the collateral effect of doing a huge amount damage to other property and to the public as a whole,” Lind said.

The damage not only threatens the health and safety of whole neighborhoods, Lind said, but is also destroying the property values of homeowners who are making their mortgage payments.

“Nobody knows the value of property that Ohio simply lost because of abandonment by lenders and owners,” he said, “but it’s in the billions, I’m sure.”

Lind thinks the time may be right for passage of House Bill 323.

“The crisis is surely becoming bigger,” he said, “and because it’s now moving out of the inner city, it’s getting the attention of people with influence and political power who otherwise for many years tended not to consider this a priority problem.”

Although no foreclosure-related bills have gotten through the legislature this year, Bill Faith thinks some momentum is beginning to gather behind the issue.

Faith, executive director of the Coalition on Homelessness and Housing in Ohio, has been in discussions with lawmakers about combining House Bills 3 and 9, which were passed by the Democratically-controlled House in May but have been stalled in the Republican-controlled Senate. He’s also pushing a measure co-sponsored by Sen. Shannon Jones, R-Springboro, that would require mediation before a foreclosure could proceed.

“The bottom line on this issue is, I think there are a number of senators on the Republican side who believe they need to have a response to the foreclosure crisis,” Faith said. “The issue has gone on too long, and they know it’s worthy of being addressed. So I think many of the members are starting to think we ought to do something on this issue.”

Jones is one of those senators.

“I think there’s a way for me and others in my caucus to support both House Bill 3 and House Bill 9 when they came out of the House,” Jones said. “I don’t think anybody is arguing that there’s no longer a need for it.”

Jones, who was a member of Foley’s committee in the House until August when she was appointed to the Senate, said she wants to focus on things “that we know work.”

“If we do that,” she said, “we’ll get something.”

Sen. John Carey, chairman of the Senate Finance Committee, where the House Bills 3 and 9 have been stalled, said he plans to hold hearings soon.

The delay, said the Republican from Wellston, has been a result of the ongoing budget crisis.

“There’s no grand conspiracy. It’s just that we’ve been backed up,” Carey said. “As far as it being an election year, I don’t think that effects necessarily what comes out of committee.”

Foley, who sponsored House Bill 3, said the time to act has long since passed, but he’s still hoping the logjam will break loose.

Foley expects the toxic title bill to be voted out of his committee on Tuesday, Dec. 15, and approved by the House in January, along with a land bank bill that was voted out of another committee last week.

“It’s embarrassing that they’re just not doing anything on housing issues one bit,” he said last week. “By the time these two bills are out, we’ll have four bills over there, at least by the end of January, all dealing with this topic.”

Contact this reporter at (937) 225-2393 or kmccall@DaytonDailyNews.com.

About the Author