The Oakland City Council unanimously expanded an aggressive blight program late Tuesday to include homes in the earliest stages of the foreclosure process.
Banks would be required to register homes in a city blight database the moment they send homeowners a notice of default, which is typically issued after three months of missed payments.
Banks would have to visit the homes once a month and gauge from the outside whether the house is occupied. If vacant, banks would be forced to pay a $568 annual registration fee, hire a property manager, secure the premises and maintain the home and yard. The city hopes to use some of the fees to help homeowners avoid foreclosure.
“Once you have a blighted house on a block, it brings down the value of all the houses on the block,” said Councilwoman Jane Brunner, the measure’s sponsor. “It is the bank that gave the notice of default, so they triggered the whole process.”
But lenders say they are puzzled by the move. After all, they say, they don’t own the homes when a default notice is sent out, thus they do not understand how they can be held responsible for blight conditions.
‘Not fair to Oakland’
“You’re asking us to come in and maintain homes that legally aren’t the bank’s property yet,” said Beth Mills, a spokeswoman for the California Bankers Association, which represents 200 financial institutions in the state.
An Oakland Metropolitan Chamber of Commerce official, Paul Junge, said at Tuesday’s meeting that 80 percent of Oakland homes are merely serviced by banks and held by others, such as Fannie Mae and Freddie Mac.
Brunner retorted that the banks’ role should not minimize their responsibility for maintaining properties.
“If you don’t want to be in the servicing business, get out of it,” Brunner said. “It’s not fair to Oakland. It’s not fair to the residents.”
The city says that last year 1,342 homes were foreclosed, and 3,347 homeowners were sent notices of default. Roughly half of defaulted homes financed by banks are blighted, according to a city analysis. The disrepair can be easy to spot.
On the 2600 block of 79th Avenue in East Oakland, three homes sat in disarray and appeared abandoned.
One home had so much trash, the owner put up a fence to keep people out, but the front door was open. Another had a foreclosure notice posted on a fence, and a pile of baby clothes reeking of feces in the backyard. The third had a blight notice on the front door, and four mattresses in the yard.
Neighbor Latanya Cotton, who works hard to maintain her own home, said she’s frustrated.
‘Tired’ of neighbors
“We try to keep our place up,” she said. But “we’re just real tired of these neighbors.”
The city says the ordinance will give them a jump on tackling potential problems quickly.
The city wants banks to register defaulted properties so it can get early and accurate information, said Margaretta Lin, who directs strategic initiatives for the Department of Community and Housing Development.
The city’s existing system results in liens and fines for blighted homes, including those under default. Under the new proposal, the city will only enforce blight complaints during the default period if they are public safety hazards, said Lin.
Dealing with blighted homes in default, Lin said, is “not something the city is able to fix on its own.”
Fee, penalty for blight
Since 2010, the city has had a program dealing with foreclosed homes. Banks were charged a $1,700 fee for blighted and foreclosed properties and a penalty of $1,000 a day if they failed to clean up on a required timeline. It has brought in more than $1.6 million in penalties and fees.
Beverly Williams said the program has had an effect. A foreclosed home on her block became a magnet for junk.
“Whatever people can dump, they would dump,” said Williams, 63, a lifelong Oakland resident. “Clothing, garbage bags, mattresses and even tires. … Because of this ordinance, someone was out there in three days cleaning it out.”