New Robber Barrons: Irresponsible Banks and Bad Landlords
BY MIKE RYAN
After a long day trying to make their new business a success, a young couple heads home. Even though the economy devastated their last business, they still have the entrepreneurial spirit we need so badly. While their dream of homeownership seems far away, they are comfortable in a rental home for now.
Buried in the daily mail filled with circulars and coupons, is an unusual letter. With harsh insensitivity, the words inform the tenants/occupants that the house will be sold via on-line foreclosure auction in 10 days.
How could this be?
They paid their rent on time every month. They had a rental agreement, a binding promise that if they lived up to their responsibilities, the landlord would let them live there for a year.
What about their deposit money? What did they do wrong?
Nothing.
Turns out, the landlord had not paid the mortgage in over two years, even before they signed their lease. The bank served foreclosure papers long ago on a former tenant. The landlord was pocketing the rent. This scenario happens all too often.
Banks vs. Jobs: Who is responsible?
Governor Rick Scott apparently told the Sun-Sentinel Editorial Board recently that blighted neighborhoods and abandoned properties left in dangerous disrepair were not caused by banks.
Gov. Scott believes the root cause is the lack of jobs.
It goes without saying that robust job expansion would help us all … over time.
However, don’t tell the working families who have encountered this scenario or the mayors, cities and neighborhoods on the frontline of the foreclosure/abandonment crisis, that banks have no responsibility and should not be held accountable.
Irrefutably bad and irresponsible lending and investment practices of some banks and financial institutions, along with some greedy borrowers who over-leveraged themselves by invitation of those earning high profits, brought us to the brink of financial catastrophe. Mortgages were inflated with the assistance of a secondary market gambling on derivatives and credit default swaps, while pushing the delusional belief the music would never stop.
People lost homes, jobs, retirement savings and small businesses.
Neighborhoods And Cities Are Left To Pick Up The Pieces.
Powerful and effective Federal program dollars for our neighborhoods, like Neighborhood Stabilization and Community Development Block Grants, have been slashed. State assistance for our streets is virtually non-existent.
As mayors, cities and neighborhoods, we deal with the very real consequences of the foreclosure and abandonment crisis. The suggestion that a simple concerted jobs effort will remedy abandoned properties with broken windows, overgrown brush, and dangerous pools is to turn a blind eye towards the present and real responsibility of banks and deadbeat landlords, as well as the complexity of what we face in our neighborhoods.
In our city, we enjoy a better working relationship with some banks through the enactment of our foreclosure registry. Taxpayer dollars spent to board up properties and protect from dangerous pools are added to the property tax bills. We established our own community reinvestment incentive program for homes, neighborhoods and properties.
However, throughout this Country there are plenty of properties where, despite non-payment, foreclosure hasn’t begun yet and the “owners” are allowing properties to fall into disrepair or scamming renters. Maybe banks are fearful of a glut of foreclosures, further increasing their responsibility to maintain properties and driving down prices. When you add the impact of foreclosure and abandonment on condo associations, as well as the remaining condo owners, you realize this is not just a jobs problem.
At the same time, working families are struggling to get themselves back on their feet. When the debt on a property far exceeds value, some landlords perform a simple calculus: don’t pay the mortgage and pocket the rent.
What is that working family to do? Hire a lawyer? Try to hold up the sale? Fight to get their deposit money back from a deadbeat landlord? Rush to get out before they lose their possessions?
For the robber baron landlord, another lawsuit is nothing more than an annoyance. The bank will predictably say they have no responsibility.
Time for Action
What we need is comprehensive action providing better protections for renters with real consequences for deadbeat landlords — perhaps criminal sanctions, treble civil damages, attorneys fees and costs. Why not? It is a fraud and deception.
Banks and lending institutions need to acknowledge their responsibility and be held accountable for their role in this crisis and the impact on our neighborhoods.
Oversimplifying the problem of abandonment and blight to bumper sticker slogans and the latest most-popular political rhetoric, like we simply need more jobs, does not protect that working family. It ignores the role of the financial institutions in this crisis, and leaves our cities and neighborhoods to pick up the pieces.
(Michael Ryan was elected mayor of Sunrise in August, 2010)
May 4th, 2012 at 9:51 am
Perfectly analyzed! Now it’s time for legislation. Mayor, are you drafting new ordinances to follow through on the issues you identified?
May 4th, 2012 at 10:24 am
mike, im sorry, while i want to agree with you i cannot. you make a case as the typical lawyer, go where the money is and in this case its the banks. how can it be the banks fault that after 2 years of nonpayment they are foreclosing.the criminal is the landlord who scammed the system for as long as he or she could. what is the bank to do allow this couple to continue paying this avarious landlord and do nothing. its a vicious circle but the blame does not fall on one side.
May 4th, 2012 at 10:25 am
sory its avaricious
May 4th, 2012 at 11:30 am
Mayor Ryan’s fine analysis of the housing crisis’s effect on communities left out one villain. Growth-mad city commissions, like the one in Sunrise, facilitated the construction of acres of unnecessary new homes, fueling the crisis. Now commissioners’ are have blighted communities. They should have asked who was going to fill all those new homes and how these new residents were going to pay for the inflated prices. Sunrise homes doubled in a few years. Everybody was on the wealth parade and asked no questions, including the city commissioners. That is The Truth.
May 4th, 2012 at 1:20 pm
In may of 2009, president Obama signed into law The Protecting Tenants in Foreclosure Act. Banks hate it and even some judges aren’t totally aware of it. It basically protects tenants who are renting property that becomes the subject of a foreclosure suit. Once the bank records their new title, they have to honor any existing written or oral lease or offer cash for keys. If a new owner buys it at foreclosure sale, they have to honor any existing lease or offer cash for keys, or if they want to declare homestead, give the tenant 90 days.
May 4th, 2012 at 2:15 pm
Mike, try to find a way to help the city, I want to know where is Governeor RICK SCOTT hiding, because he does not care about the citizens.
May 4th, 2012 at 5:01 pm
WHILE ARE THERE IS ENOUGH BLAME TO GO AROUND IT ALWAYS COMES DOWN TO THIS.
PRIOR TO THE HOUSING BOOM IN A NEGOTIATION BETWEEN BORROWERS AND BANKS THE LATTER HAD ALWAYS BEEN THE ADULT AT THE TABLE.
THEY ALLOWED THEIR GREED AND STUPIDITY TO GET IN THE WAY AND THIS WAS THE RESULT.
May 4th, 2012 at 6:24 pm
when supply exceeds demand you get glut.
what Amendment 4 would belatedly restricted had it passed, the marketplace is doing now all by itself.
no sympathy here and get used to it as it will be 5-7 years per newly hired economic director in ft lauderdale before we see any turn around
May 4th, 2012 at 9:12 pm
Thank you, Mayor Ryan. Sunrise lucked out when you were elected. Ethics and integrity in an elected official…what a breath of fresh air!!!
May 4th, 2012 at 10:28 pm
Sam…. the banks were never at the table…it wasn’t their money…that’s the problem now too…this mess required hands-on in the settlement process by the investors and they arent the banks….these “plaintiffs” have corrupted the legal process on both sides…they sue with forged papers and facilitate unethical practices by some defense lawyers and their a lot of their clients
May 5th, 2012 at 4:46 am
“Go where the money is as a lawyer”? Where is the money in this? It’s simply laid out as a matter of right and wrong. Who is at fault when working families pay rent that goes nowhere toward protecting their homes? The unscrupulous landlord who is not making payments. What does this have to do with a surfeit of housing? Nothing and basic economics would show a glut of properties should lower prices, not burden taxpaying residents. The peripheral fault with banks is well documented over the last five years in risky lending practices…that’s well documented. A requirement for pre-lease disclosure on landlaord’s payment history would protect potential tenants; further requirements to show the landlord services existing debt with current cashflow from tenants would further protect the working family. No lawyer makes money from this. In a normal (not perfect) world, we would not need legislation for something as black-and-white as debt-servicing and renter’s rights but who would think unscrupulous owners could be this brazen and immoral in their disregard for their working family victims.
May 5th, 2012 at 5:48 am
Housing prices did not double because of pro-growth commissions. That is simply a fundamental misunderstanding of economics and the dynamics.
Appraisals on EXISTING homes doubled because of a secondary market overly thirsty for mortgage backed securities and the instruments constructed to gamble on those. There is NOTHING a commission or city did to increase value on EXISTING homes.
It is true there are some cities that expanded dramatically between 2000-2008 as homes were being built at a rapid pace. The explosion of “McMansions” pushed by developers and brokers willing to lend with little equity no doubt added to the problem.
“The Truth” has some points, but the commissions could have done little to slow the the expansion of home developments, and certainly had no role in the over inflation of EXISTING home prices. By the law of economics, in fact, the idea that existing old homes doubled in value is a causally relatd to the fact there was too much demand (fueled by mortgage market providing low equity loans), not enough supply, and brokers were building appraisals upon previously inflated values.
Might be convenient to blame commissions and there are likely examples where they may have been able to slow development. Dont give the banks and bad landlords who got huge mortgages with little or no equity a pass because you hate electeds.
May 5th, 2012 at 6:04 am
Here is the link to the 2009 Act:
http://www.fdic.gov/news/news/financial/2009/fil09056a.pdf
Under the act, the tenants get to stay until the end of their lease (unless new owner intends to live in the home, then 90 days); month to month tenants are supposed to be able to stay 90 days. Some banks offer cash for keys to accelerate the departure, but not mandatory.
State law more protective is preempted by the federal law.
This law sunsets in December 2014.
The law is silent about deposit.
The law does not punish landlords. The banks not thrilled and slows the absorption of the properties. Not fair? Stop whining. Punish the dirty landlord who pocketed the rent!
May 5th, 2012 at 10:33 am
These so called “landlords” I call them thieves rent these properties with no lease agreement most of the time. They are able to tap the market of undocumented aliens or take advantage to people who can’t qualify for an apartment. When the tenants are evicted they have no legal recourse. It’s the responsibility of the bank to secure these properties once action has been taken. To many times these properties sit for almost year abandoned. The blame should be spread around.
May 7th, 2012 at 1:43 pm
The federal law affords far more protections than the state law. In Florida, a landlord can terminate a month to month tenancy with 15 days notice (Fl.Statute 83.57.) The fed law mandates 90 days. Until the bank is awarded title and records it, the landlord who is in foreclosure is free to rent out the property even though they’re not paying the mortgage. They legally still have title.
May 8th, 2012 at 3:48 pm
Broward County come up with a plan. So far only a few cities have signed on.
http://browardlandlord.wordpress.com/2012/05/04/broward-turns-up-the-heat-on-deadbeat-banks/
May 9th, 2012 at 8:50 am
Hey what’s just as greedy (avaricious) as a landlord ? A LAWYER enough said.