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Blighted-home tour show why banks make bad neighbors

Juliana D. Norwood | 5/23/2012, 5 p.m.

As the foreclosure crisis in Los Angeles continues, a group of residents and members of Service Employees International Union (SEIU Local 721), the Alliance of Californians for Community Empowerment (ACCE) and Good Jobs L.A. led a tour of blighted bank-owned foreclosed properties and asked the city to begin assessing the banks with fines under the Foreclosure Registry Ordinance.

"These banks are devastating our communities, and the city and the taxpayers are covering the cost," said ACCE member and South L.A. neighborhood activist Angelina Jimenez. "They caused the problem--it's time to make them pay for it."

Tour participants saw homes in severe post-foreclosure neglect and heard of the compounded negative impact the properties have had on surrounding neighborhoods--break-ins, trash and health hazards, lost property values, and an increase in area crime.

Leaders of the tour read off the names of the banks that own each property and asked that the city fine the maximum authorized amount for each bank's failure to maintain the properties from the date they became blighted. Major offenders were Bank of New York Mellon Corp., Deutsche Bank, U.S. Bank, and Fannie Mae, which is a government entity.

Participants were provided data on the success of similar ordinances in the cities of Oakland, Richmond, Riverside and San Jose, where millions of dollars in fines have been collected, paying for other city services as well as additional inspectors to enforce the policies.

In May 2010, Los Angeles passed the Foreclosure Registry Ordinance, which was designed to protect neighborhoods from foreclosure blight. The ordinance requires banks to register properties that they have foreclosed on, or once they begin the foreclosure process by issuing a Notice of Default (NOD). The ordinance imposes fines of up to $1,000 per day ($100,000 per year cap) on banks that fail to maintain those properties.

Two years later, however, no banks have been fined for violating the ordinance, even though the city is riddled with blighted homes. Other cities with a stronger enforcement process have seen much better results from the ordinance. Riverside, for example, in its first year enforcing the ordinance, issued $7 million in fines and collected $3 million in fees, amounting to approximately $2,700 in fines for every foreclosed property in the city.

As of May 10, 2012, 18,852 properties in Los Angeles are in some stage of foreclosure. If Riverside, with one-twelfth the population and one-seventh of the foreclosures imposed $7 million in fines, considering all other things equal Los Angeles, if as effective in policing and fining, might be expected to issue $49 million in fines in its first year, according to research from ACCE.

The group has come up with a list of ways to expand enforcement revenues under the existing Los Angeles Foreclosure Registry Ordinance including:

  • Dedicate code inspection staff to do vacant property inspections.
  • Improve communication by creating a direct link between code enforcement officers and senior bank officials who can better resolve violations and fines.
  • Implement a proactive inspection program by focusing on all properties owned by a particular bank trustee at the same time.
  • Focus inspections on properties that do not submit required monthly inspection reports.
  • Work with the L.A. County Assessor's office to improve the timeliness of reports to the city and other municipalities when banks begin the foreclosure process by issuing a Notice of Default (NOD).