Ohio Passes Fast-Track Vacant Property Foreclosure Bill

Better late than never, I am glad to see that a "fast-track" process for foreclosures of abandoned property just passed in the Ohio legislature.  The text of the bill is here (click on the link to see the current version, then scroll to page 81 of the PDF), and there's an industry article about it here.  The bill essentially enables foreclosing lenders to petition the court for a quite speedy foreclosure process if the mortgage is in default and three of several factors are present (basically all of which are signs of abandonment).  I wrote about this issue back in 2009 in We Don't Live Here Anymore: A Critical Analysis of Government Responses to the Foreclosure Crisis, where I criticized misplaced government efforts that actually delayed the foreclosure process, which at its worst led to entire blocks of abandoned "underwater" homes that homeowners didn't want and lenders couldn't foreclose on and resell.  This is a small step, one that hopefully will help mitigate some of the blight that follows during the period after an underwater (or otherwise) homeowner abandons a property and a new owner takes over.  But it's only a small step.

The problem is that it's nearly impossible to legally abandon ownership of real estate.  In "underwater" scenarios like those that were so ubiquitous in 2008 and beyond, you can't sell because you owe too much on the house.  The lender probably isn't going to take a deed-in-lieu or approve a short sale, certainly not if you have other credit problems (as is likely the case if you can't pay your mortgage) or a second mortgage that it would take a foreclosure to wipe out.  (And back then you were lucky even to get a response from the massively overwhelmed loss mitigation departments of most mortgage lenders.  Add to that limitations on the amounts that lenders could take as a loss on short sales...often the price the market would bear for a property was under what the lender could even accept for the short sale offer due to mortgage insurance and other constraints.)  You've probably spent many sleepless nights worrying about your declining property value, bills, where your family is going to live - whatever your personal situation may be that led to the default in the first place.  All the while you're responsible for anything that happens on the property.  Bankruptcy probably isn't going to solve the problem, because even if you aren't liable on the loan, you still own the house.  What do you do, hide your head in the sand?  I think a lot of people did just that in the wake of the foreclosure crisis - they moved on and tried to forget about that huge problem that they had just left behind.  And meanwhile, there's a vacant house on the street that in the best case will remain so for several months, in some cases much, much longer.  No one wants a house next door with a padlocked front door and three-foot high grass.

Ohio's new bill isn't going to solve these problems, but it is a step in the right direction.  I just wish it was eight or nine years earlier in the making.  For many those who lost their homes in the wake of the mortgage crisis, it's taken that long just to start seeing their lives get back on a normal track.