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Cape looks to make lenders responsible for default property upkeep

By Staff | Dec 13, 2008

The Cape Coral-Fort Myers metro area once again topped the list of foreclosure filings last month, and the cost of caring for vacant houses created by the failing mortgages being incurred by the city is on the rise.
Cape Coral city council members will consider a way to offset those costs Monday when they are expected to vote on an ordinance that would make lenders responsible for the maintenance of abandoned properties they have foreclosed.
“The intent is clearly to pass some of the responsibility on the mortgage holder,” Mayor Jim Burch said.
Under the proposed ordinance, any lender that holds a mortgage on a property in foreclosure as of March 1 would be required to inspect the property by May 1. If the property is found to be vacant it must be registered with the city for an annual registration fee of $150.
Surging foreclosures mean the city is dealing with more expenditures related to maintaining abandoned homes at the same time it is seeing revenues from property taxes drop.
For the 2007 fiscal year the city budgeted $16,000 for lot mowing. For the 2008 fiscal year $133,000 was budgeted. Since June 2007, the city has spent $195,273 on mowing 3,354 abandoned properties. In the 2007 fiscal year, 634 lots were mowed.
The city has also boarded up some 90 pools and spas to guard against accidental drownings, costing around $3,500.
“What’s happening is we’re becoming the property managers for these properties,” said Frank Cassidy, division manager of the city’s code enforcement.
The ordinance would call on lenders to inspect abandoned homes twice each week, maintain the lawn and vegetation surrounding the house, and remove any items left behind in the home after the foreclosure.
Elmer Tabor, chairman of the Cape Coral-based Riverside Bank, said he thinks the city is going too far in trying to shift the burden of maintaining abandoned properties.
“They’re putting more requirements on the banks than they do on me as a homeowner. It’s absurd,” Tabor said.
“I would suggest the city really needs to go back and look for a way to do this differently. Not only is it in conflict with Florida statutes but also pushes on the edge of being unconstitutional,” he added.
Tabor said the ordinance as proposed takes rights away from property owners by making banks responsible for inspecting the property before issuing a final foreclosure notice.
“In essence what they’re doing is taking property away from the property owners. Technically and legally that’s not my property until it’s officially foreclosed on,” he said.
Burch says he believes the ordinance only requires inspections after the final foreclosure notice is issued.
Riverside already drives by certain properties on a weekly basis to see if any maintenance is needed, Tabor said.
“On a case-by-case basis we will go ahead and mow the lawn and make sure the door is locked,” Tabor said.
“I’m not going to spend additional money to re-landscape and I’m not going to re-paint that house like the city ordinance would require me to do,” he added.
Both the city and the banks are seeing revenues drop as foreclosures rise. Revenue from property taxes are expected to fall 35 percent next year, and new federal and state regulations were imposed on Riverside last month to improve the bank’s financial standing.
City officials say the problem stems from the lag time from the date a property enters foreclosure on until it goes back on the market and is sold. That period of time can span up to one year, and meanwhile the city is maintaining the properties.
“(The ordinance) is filling the responsibility gap in the gap period,” Cassidy said.
Tabor said the glut of foreclosures means the court system is backed up trying to deal with them, but called a plan by Lee County Clerk of Court Charlie Green to push them through the system a “double-edged sword.”
“There are so many in the court system right now it’s got the court system backlogged. It takes anywhere from nine months to a year to get them through the system and out on the market,” Tabor said.
“If you start dumping twice as many on the market, you’re going to drive the (home) prices down even further, which is the last thing you want to do,” he added.
Green said he has five judges working on the foreclosures to reduce the number the system (which currently stands near 25,000). The move is an effort to return properties back into the hands of responsible parties.
“We’re trying to get rid of the backlog. We’re trying to get most of the foreclosures through the system as quickly and as efficiently as possible so that there’s a responsible party that’s taking care of the property,” Green said.
Former Cape Coral council member and real estate agent Gloria Tate worked with Cassidy to bring the ordinance forward. She said the banks have an obligation to care for abandoned properties and can do more to get them out on the market once they are foreclosed.
“The key to getting them through the market is the lenders. That process takes forever,” she said.
Two Florida cities, both located in Broward County in southeast Florida, have adopted similar ordinances.
North Lauderdale began a Neighborhood Improvement Program in January and Coral Springs followed suit with a similar program in June.
Kevin Pierson, coordinator of the Neighborhood Improvement Program, tracks properties in pre-foreclosure as well as those that have already been served a final notice on a weekly basis.
North Lauderdale’s program calls for a $50 registration fee, and the city currently has 226 vacant properties with 64 registered.
“The whole thing is a proactive approach. If (the banks) are taking care of the property they don’t hear from the city again,” Pierson said.
Properties in violation of the ordinance incur daily fines of $100 to $250, depending on the violation, he said.
Coral Springs imposes a $150 registration fee on mortgage holders as soon as the house is foreclosed.
“As soon as the title changes hands, that’s when we require the registration from the bank,” said Ken Maroney, chief code enforcement officer for Coral Springs.
Coral Springs has approximately 500 bank-owned properties and another 2,300 in some stage of foreclosure. About 480 registration forms have been sent out, about 180 returned, a good number for a new program, Maroney said.
Officials at all three cities stressed the importance of having a local contact responsible for the upkeep of abandoned property.
“We’re not going to let properties accumulate overgrowth and cause a health and safety issue,” Maroney said.