It is the lack of supervision over servicers makes it possible for a property to be foreclosed upon but never sold.
The home in Durham which was pictured in this entry is among that group. A Colorado company called Specialized Loan Servicing currently has the contract to service this home. Standard & Poor's says that of
September 10th, SLS has a servicing portfolio of $12.3 billion in home mortgage loans, covering 148,687 "units."
Inaction is a systemic problem with the bank walk-away. In its 2010 report about the issue, the GAO said that there are no rules preventing a servicer from choosing to abandon a home. Even worse, its a systemic problem with a one-step solution.
Things would be simpler if this gap was just a matter of enforcement. Regulators can enforce a rule, but only when it exists. Granted, this is still a hypothetical: the agency has to want to enforce its rules. So while many have argued that the pre-emption policy was devised as a means for federal regulators to help banks evade state laws, it's only possible to improve the situation through future rule-making.
Alas, there are no regulatory agencies currently empowered to stop it from happening. Now that will likely change in short order because the CFPB is going to take on oversight of servicers.
It may be even harder to collar Specialized Loan Servicing. SLS is owned by Shinsei Bank, a Japanese financial conglomerate with 8.7 trillion yen in assets.
There are pages of complaints on SLS. There are 31 complaints on this consumer site alone. Many seem to go back to mortgages that were originally made by Bank of America.
I know its hard to believe that Bank of America would do something like that.
Here is a typical quote:
It started when in 2008 my marriage fell apart and I lost my job in Atlanta, GA. After losing my job, I tried to work with Bank Of America who held the mortgage on my home. I tried to keep my home up to 2010 by doing a loan mod, short sale, even deed in lieu. When I tried to sell my home in 2008 it sat on the market and I kept adjusting my price, called and setup for a short sale and that never panned out. In 2010 I filed for Ch.7 protection as it was my only option. After I'm discharged from this debt, SLS get the note and somehow keep calling me! I had to threaten legal action against them to stop harassing me. So now it's 2012 almost 2013 they have yet to file the foreclosure action on this property, I've never paid on this place for 5 years I've told them that I have no intent on keeping the place, I was discharged and they just say there is nothing they can do. So I keep calling to get them to get my name off the deed and they refuse to do so.
The question of how the CFPB might oversee (write rules, supervise, and enforce) servicers is in the initial stage of currently under consideration is silent about bank walk-aways. Comments on potential guidelines close next Tuesday.
In the case of the particular property in Durham, a non-profit petitioned the Clerk of Courts to demand that the home be sold out of foreclosure.
While that is a victory, its only one victory. It is a local victory that could be a model for other counties to replicate, it is not a national solution. The fact that case is going to find a resolution, and in short order, has only occurred because a progressive Clerk of Court was willing to use the judicial review process to help a neighborhood.