Turn the foreclosure tables

Article Courtesy of The Palm Beach Post

Palm Beach Post Editorial

Published March 8, 2009


On Thursday, the Mortgage Bankers Association reported that Florida ranks third in mortgage delinquencies, second in foreclosures started and first in foreclosure inventory. At year's end, 22 percent of mortgage borrowers were at least a month behind on payments. 

Everyone pays, directly and indirectly, for these often vacant, blighted foreclosed properties. Abandoned homes can pose public safety hazards and further deflate property values. Cities and towns may have to maintain the properties at taxpayer expense. Nearly two-thirds of the 1,589 condo and homeowner associations surveyed recently by the law firm of Becker & Poliakoff say they face financial problems because of the foreclosure crisis. Homeowners who can't pay their mortgage often don't bother with association dues. Lenders that have been slow to foreclose often don't pay outstanding maintenance fees.

Greenacres Mayor Sam Ferreri said several condo associations in his city are close to bankruptcy. Many can't pay garbage collection fees to the city. "It's the highest delinquency rate of garbage we've ever had," said Mr. Ferreri, even though Greenacres has the lowest rate in Palm Beach County at $6 a month. "Do we raise our rates?" In Royal Palm Beach, the village is keeping up the lawns of abandoned homes.

The crisis requires a coordinated response from the state and from county governments. Counties should follow the lead of cities that are passing ordinances to require the upkeep of foreclosed properties, regardless of who owns or holds title. Boston required companies to register foreclosed properties with the city, identify who is responsible for maintenance, post the contact information on the property and pay a $100 annual fee on each vacant home.

Such a law in Palm Beach County would save taxpayers in communities such as Greenacres and Royal Palm Beach from paying costs that lenders should bear. The Legislature can do its part by passing a bill proposed by Rep. Julio Robaina, R-Miami. It would require lenders to pay, within 15 days of filing a foreclosure, all unpaid fees owed to condo and homeowners associations. It also would increase lender liability for past due payments for up to two years instead of the current six months and allow associations to seek fee payments from tenants. Many homeowners who lease their property continue to collect rents during the foreclosure process, while neglecting to pay their dues. Tenants could deduct the fees from their rent.

"The money that the associations spend taking care of the property go to protect and preserve the value and condition of the bank's collateral," said Ken Direktor, chair of the community association practice group of Becker & Poliakoff. "Why shouldn't the banks have some responsibility for those expenses? Why should the banks look to the rest of the community to subsidize those?

Rep. Robaina's bill will face strong opposition from the banking lobby. Caving to that pressure, though, only would exacerbate the crisis. Struggling associations often have no choice but to increase assessments on paying property owners, which could force many of them into foreclosure. This cycle is a cancer in Florida, and government must treat it.