Do YOU need one? Presented by – Doug Leeper, Code Enforcement Solutions [email protected] (619) 791-9292 25+ years in local government Fire Fighter Police Officer Code Enforcement Officer/Manager Supervised enforcement of over 30,000 cases Testified before Congressional Sub-committee on Domestic Policy Finalist Harvard Innovations in American Government Award 5+ years as CE consultant Speaker/Panelist at conferences of MBA, CMBA,USFN, REOMAC, CFSPA, NPPC, NVPC, CEOA, CACEO and Edu-Code (AACE) Short History of Lending in America Cause of the Current Crisis History of VPR’s in America Evaluating the Problem Responding to the Problem Enforcement of the Remedy Questions Campfire Songs and Scary Stories As long as there have been mortgages there have been foreclosures Historically there were three main causes 1. Loss of Employment 2. Illness 3. Divorce All of which resulted in an inability to make payments Primary cause today? 1. Inability to make payments Housing (single family) was not considered a “financial investment” until the late 1970’s Previous to that time SFR’s deteriorated faster then they appreciated They were a good “personal investment” 1970 = 20% down – 3 to 5 years on current job – payment could not exceed 25% of net monthly income FHA / VA loans were only “creative options” 2000 = 0% down (or less i.e.: 120% loan to value) “stated income” – payment could be as high as 60% of net monthly “stated income” Lending practices created an artificial demand (Pulsen Penn Lending) Creative/Exotic Financing “qualified” unqualified buyers Uninformed “qualified” buyers entered into high risk / low initial payment loans (ARM – Neg-Am – Interest only – Balloon) Developers proposed projects to fill demand Cities approved new developments to fill demand Builders rushed to build to fill demand Mortgage brokers and real estate agents . . . Not new Primarily in the Northeast “Rustbelt” Required reuse plan Progressive fines for continued vacancy/abandonment 2007 City of Chula Vista CA 200+ cities in 2008 800+ cities currently 3rd Mo Cav Dis Abandoned residential properties Visual blight Attractive nuisances Neighborhood destabilization Reduction in home values Less property tax $ collected Decreased “marketability” Increased calls for service More abandoned residential properties . . . Overgrown or dead vegetation Unmaintained pools, spas and ponds Buildup of flyers, notices, newspapers and mail Trash, debris, junk and discarded personal items Accessible rear yards Unsecured structures These could all be present at an occupied property NO ONE TO REPORT CRIMES, MAKE CORRECTIONS OR HOLD ACCOUNTABLE •Overgrown or dead vegetation •Unmaintained pools, spas and ponds •Buildup of flyers, notices, newspapers and mail •Trash, debris, junk and discarded personal items •Accessible rear yards •Unsecured structures If you have existing ordinances that cover these, then you don’t necessarily need another one to cover them again. But there are issues that may not be covered in your code that may require you draft a new ordinance. Are you a judicial or non-judicial foreclosure state? What is the average time for completion of a foreclosure? Does your code identify the lender as a responsible party in PRE-FORECLOSURE ABANDONMENT? What recourse does your jurisdiction have for remediation of vacant/abandoned properties? 1. 2. 3. 4. 5. Hope the mortgagor remedies the default Hope the property will sell prior to Trustee’s Sale Hope some other entity will buy at Trustees’ Sale Hope they can sell/transfer the loan to another beneficiary They “. . . can’t take any action while it is in presale . . .” Any action taken on a pre-sale property, including local registration, will trigger mortgagee in possession “Filing a local registration, securing and maintaining the asset in accordance with your contract DOES NOT trigger mortgagee in possession.” Ronald Chemek, esq., Reimer, Lorber & Arowitz “Our mortgage documents give us the right to remedy these issues to preserve our collateral.” Jill Rein, esq., Pierce & Associates Dirty Little Secret Mortgage ABANDONMENT AND WASTE CLAUSE CAN CAN’T Discard personal property Register and Post Secure against Deny access Vandalism Rent Theft Sell or offer for sale Trespass Maintain against Devaluation Deterioration Trespass Two Types of Properties In Compliance Not In Compliance Don't Know Those Who Will Don't Care Those Who Can't Educate WE OFFER HELP Encourage Two Types of Properties In Compliance Not In Compliance Don't Know Those Who Will Don't Care Those Who Can't Educate WE OFFER HELP Encourage Enforcement There are only two types of compliance. 1. Voluntary 2. Enforced Administrative Citations Inspect Via Warrants Cease & Desist Orders Post Dangerous Building Post Do Not Occupy Vacate/Relocate Board and Secure Notice to State Tax Board Recordations Lien Foreclosure Land Bank Utility Disconnects Civil Penalties/Daily Fines Abate Summarily Abate Via Court Order Public Nuisance Abatements Demolitions Receiverships Unfair Business Practices Suits Injunctions Criminal Prosecution Daily Fines A FULL COST RECOVERY COMPONENT SHOULD APPLY TO ALL CASES/OPTIONS COMPLIANCE IS THE GOAL Do You Need a “New” Ordinance? Use THEIR language and terminology Detailed definitions Be specific ALWAYS perform due diligence ALWAYS provide due process Only as good as willingness and ability to enforce. Don’t have the method AND the means? Don’t bother. Lenders will take the path of least resistance. Tran$lation? Lea$t expen$e. “WHAT WORKS, WORKS. WHAT DOESN’T WORK, DOESN’T WORK. WORKING HARD AT SOMETHING THAT DOESN’T WORK . . . WON’T MAKE IT WORK.” John W. Alston QUESTIONS?