The Office of the Comptroller of the Currency (OCC) is giving banks a “free pass” says Ohio senator Sherrod Brown (D) – and he’s not going to let them get away with it. In an open letter to the OCC, Brown accuses them of “implicitly approving the practice of having lenders release a lien securing a defaulted loan rather than foreclose on the residential property.” In effect, he says, banks now have a green light to abandon foreclosed homes, a practice that has wreaked havoc on property values and neighborhoods in Ohio and that “leaves local taxpayers on the hook for maintenance and cleanup costs.” While no one, including Brown, is denying that in some cases it makes more sense for lenders to walk away from a property than attempt to maintain and sell it, the senator insists that such actions should not be included in guidelines for regulators and essentially supported by the federal government[1]. By including this practice in the guidance issued by the OCC to mortgage servicers last month, Brown says that the federal government has, in effect, legitimized “a practice that is unfair to homeowners and local committees.”
In light of the new regulations and guidance formulas, Brown says that the OCC needs to “force stronger standards to help keep homeowners in their homes and prevent unneeded evictions in already distressed neighborhoods”[2]. This makes some sense, since these properties are more likely than most to be found “not worth saving” by lenders since they are in areas that already are dealing with plummeting property values. Ohio foreclosure rates slowed dramatically last year as a result of the robo-signer fiasco, but most analysts believe that foreclosures will speed up again in 2012 as lenders attain clarity on what they need to do to successfully foreclose and try to clear the foreclosure pipeline[3]. If this is the case, Ohio could be hit hard this year both by foreclosures and with abandoned property problems.
