July 14th, 2010 by Michael Oliver

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If Tucson had this ordinance homes in disrepair wouldn't be allowed. That would be a good thing for the city at large and individual neighborhood across the city

Los Angeles last Thursday enacted a new ordinance that holds lenders/ servicers responsible for keeping foreclosed homes from falling into disrepair and derelict conditions. The ordinance can fine lenders up to $100,000 if they let a property fall into bad condition.

This is basically how the new ordinance works;

City officials said they hope an ordinance that took effect Thursday will help building inspectors identify the banks that own such foreclosed and abandoned homes and — with the threat of stiffer fines — encourage them to keep them clean and safe.

It is the city’s latest attempt to deal with neglect at many of the 27,000 foreclosed homes in Los Angeles. It allows the city to levy fines of up to $100,000 against financial institutions that seize homes and allow them to fall into disrepair.

It starts by addressing the limbo period between when a lender issues a mortgage default notice and the point that the title transfers to the lender. Banks often don’t consider the properties their responsibility until after they take the title. The ordinance now makes them responsible as soon as they issue a default notice. From the L.A. Times on 7/11/10

I personally think this is a great way for cities to address several concerns; first they will be directly responsible for keeping properties in good shape and not letting them become serious eyesores as almost every neighborhood in Tucson has to deal with. Secondly it will make banks move their foreclosures faster as now they have to keep up on condition of property from time of foreclosure notice. To keep costs from mounting they will want to sell the homes much sooner then inherit the costs of holding onto the property where other repairs, and upkeep would arise. This will result in better initial pricing for buyers and will keep the foreclosures moving and not in the “shadow” or “limbo” state a lot of foreclosures can sit in for 3-6 months before the lenders have them cleaned up and ready for sale.

So is this something Tucson will do? Is it a good idea?

I hope Tucson will do this as it will help neighborhoods, values, and just the overall blight a foreclosure in disrepair can create. I also think it is a very good idea as the city can use the money if lenders want to let properties be in a derelict condition. For lenders it maybe a little harsh as sometimes the properties before they are even served a foreclosure notice will be in disrepair and the lenders will need to be on their toes yet the overall good/ goal of the ordinance is much greater then the lenders extra work/ money needed to comply.

If anyone has their thoughts on the subject leave them as I can imagine stances on both sides of this.