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U.S. Bank denounced as being 'slumlords'

By Catholic Online (NEWS CONSORTIUM)
August 29th, 2012
Catholic Online (www.catholic.org)

The fifth-largest commercial bank, U.S. Bank has 3,000 branches in 25 states. According to the L.A. city attorney's office, the bank is also "one of the largest slumlords in the City of Los Angeles." The bank is accused of neglecting many of its foreclosed properties, leading many neighborhoods in to blight and disrepair.

LOS ANGELES, CA (Catholic Online) - U.S. Bank is suspected of letting more than 170 foreclosed properties slide into disrepair, decreasing property values and increasing crime rates.

These allegations were also made in a lawsuit filed by the city attorney's office last year against Deutsche Bank. Activists around the country say their communities have suffered as neglected foreclosures deteriorate in the popping of the housing bubble.

It's estimated that 620,000 foreclosed properties in the United States are owned by lenders, according to RealtyTrac. Known as REOs, or "real estate owned," these properties have since begun to drop, down from over one million in January 2011.

The grim housing market means that these homes aren't being revitalized anytime soon. Of those 620,000 houses, 24 percent had been waiting for a new buyer for two years or more, and 11 percent for three years or more.

"The longer a property spends in REO status, the greater risk of falling into disrepair and dragging down the quality of the neighborhood and value of surrounding homes," Daren Blomquist, vice president of RealtyTrac says.

U.S. Bank maintains that the city's lawsuit targets the wrong party. U.S. Bank, spokesman Tom Joyce says, is not the servicer for the foreclosed homes in question, but the trustee. Joyce says that the mortgage servicer or the institution that's been collecting payments on a loan -- is responsible for the home's maintenance.

"At the end of the day, it's only the servicer that can foreclose on a home, and it's only the servicer that's responsible for the upkeep of those properties," Joyce said.

Banks hold their mortgage loans on their own books, in some cases. Loans are securitized at other times, pooled together with other loans. In these cases, a trustee distributes payments from servicers to the bondholders who own the mortgages.

Los Angeles Assistant City Attorney Tina Hess says that trustees are required to take action when servicers of foreclosed properties fail to maintain them.

The complexity of the modern housing market -- where the owner of a mortgage loan, the servicer and the trustee might all be different -- has exacerbated the problem, Hess says.

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