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Banks pay for blight in foreclosure ordinance

May 21, 2010 12:00:00 AM PDT
The Los Angeles City Council took action Thursday designed to penalize banks that foreclose on homes and then allow properties to become blights on local neighborhoods.In Los Angeles County, there are 100,000 homes in some state of foreclosure. The city council passed one of the toughest laws in the country to hold banks responsible. If foreclosed homes fall into disrepair, banks can be fined up to $100,000.

Once the banks seize the homes they often fall into disrepair. They become part of the "broken windows" theory of crime, attracting vandalism, challenging public safety, and dragging down the value of other homes in the neighborhood.

"We see houses that are being taken over by gangs and drug dealers," said L.A. City Council President Eric Garcetti. "It drags down the entire street. And it's not specific for banks, but any property owner has the obligation to keep those homes up."

Garcetti was a sponsor of the ordinance aimed at keeping banks from neglecting foreclosed homes.

The ordinance would set up a central registry of foreclosed homes and require banks to give the city the name of a local contact person. Failure to comply with maintenance regulations could result in fines of $1,000 a day, up to $100,000.

"The best thing that would happen is that the banks would really work to renegotiate these loans and mortgages with the homeowners. That's what we really need. That would be the best corporate citizenship that they could provide during this tough economic time," said L.A. City Councilwoman Janice Hahn.

Councilman Bill Rosendahl angrily suggested putting a couple of bankers in jail.

"Maybe they could have put a couple of realtors in jail too, who who misrepresented it," said Rosendahl.

The ordinance, along with establishing a registry of foreclosed homes, would also force banks to provide a list of homes in pre-foreclosure status.

"Somebody is listening to us because we've been complaining about blight houses for a number of years," said Watts resident Jacqelyn Simms.

The foreclosure registry program was passed unanimously. It was backed by the city's unions. They hope it will reduce layoffs and furloughs.

The city hopes the fees and fines will raise about $5 million in the next fiscal year.


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