Vacant and Abandoned Properties Task Force Briefed on Vacant Residential, Commercial Properties
By Jocelyn Bogen and Eugene T. Lowe
January 28, 2013
Conference of Mayors Vacant and Abandoned Properties Task Force Chair Columbia Mayor Steve Benjamin opened the meeting on January 17 stating the task force purpose to afford mayors the opportunity to learn the latest and most effective policies and best practices for making vacant and abandoned properties productive and useful to our cities and citizens. Four speakers addressed the task force on vacant and commercial properties, much of this taking place because of the economy and foreclosures.
HUD Acting Assistant Secretary Mark Johnston began by giving mayors an encouraging word: “The number of people falling into foreclosure is the lowest it has been in 5 years.” He added, “Places with targeted neighborhood stabilization investments have seen vacancies fall and home prices rise.” As for HUD’s Neighborhood Program (NSP)—a program created to address the foreclosure problem—“…is currently on track to address 95,000 properties before its end.” He told the mayors that 95,000 properties out of three million might seem small, but it “…represents a quarter of the REO in the hardest hit places.” Johnston provided examples. He cited Chicago that formed “a unique partnership with Mercy Portfolio Services, a nonprofit housing agency, to manage all of the implementation of the NSP Program. The city and Mercy organized a network of more than 50 developers to rehabilitate foreclosed and abandoned buildings. Allowing them to operate in multiple locations at the same time offers quick results to halt deterioration.”
Wells Fargo Vice President Bill Honaker discussed vacant commercial properties. He told the mayors that commercial assets include all real estate except for property covered by mortgages. Consequently, land is a huge portion of Wells Fargo commercial portfolio. After describing to the mayors what happens before the bank can take control of a property (primarily a lengthy waiting time due to legal limitations), Honaker then discussed the process once the bank gets control of commercial property. The first item of business is to look at safety and environmental risks. The second is stabilize the property as soon as possible, which includes taking care of expenses such as back property taxes. The next step is to understand the highest and best use of a particular property. The final step is the disposition strategy. Honaker then explained the process that Wells Fargo followed in a recent transaction with Virginia Beach Mayor William Sessoms, where the bank was able to work with and help the city meet its goals to preserve a very environmentally sensitive piece of property.
Wells Fargo Premier Asset Services REO Community Development Vice President Tyler Smith talked about the bank’s efforts from default through the REO disposition with respect to residential property. Smith described the management of properties before foreclosure takes place. Once a property is 45 days delinquent, it is triggered for inspection. Vendors are hired to inspect the property every 30 days. The bank manages and secures the property that includes such things as mowing the lawn. This is all on the pre-foreclosure side. Tyler said, “Our goal is to protect the asset. We want to maintain the properties and retain any value that is in the property until it gets to REO.”
Safeguard Chairman Robert Klein said that he runs what the industry calls a field service company. Having absolutely no interest in the property, Safeguard performs property inspections across the entire country for a number of clients exactly the same way Wells Fargo does for its properties. When a loan goes delinquent 45 days for any of its clients, Safeguard goes out and inspects the property right away. Klein said Safeguard has a nationwide network of 14,000 people who carry out these inspections. Properties are inspected on a monthly basis. Of major concern to Klein was the length of time from the 45-day delinquent trigger for inspection to actual foreclosure taking place. This, he said, in some States can take two, three and even four years. During this time, the maintenance of the property is at serious risk.