Update in the Fight Against Blight

November 26, 2012 § Leave a comment

Victory at City Hall But More Work Needed to Hold Banks Accountable for Cleaning Up LA Communities

On November 20th, the Los Angeles City Council voted unanimously to adopt an amendment to the foreclosure registry ordinance removing the exemption of a registration fee of $155 for banks that register their foreclosed properties on a Real Estate industry controlled database, known as MERS. MERS was difficult to use, and made it hard for city staff to determine lenders of record responsible for foreclosed properties. Now, all lenders, beneficiaries or trustees will have to register all foreclosed properties with the LA Housing Department, and pay the annual $155 registration fee. By staff estimates, this may bring an additional one to two thousand more properties into their program, and add fees of $300,000.

A Good Jobs LA representative testified that we welcome the elimination of the MERS exemption as a first small step toward moving banks to clean up hundreds of blighted properties they are still failing to maintain. But we call it a small step because LA still lags way behind many smaller cities when it comes to motivating banks to clean up these properties.

The City Council acted in June to strengthen the Foreclosure Registry Ordinance after Good Jobs LA presented the council a report showing that smaller cities like Chula Vista, Richmond, Riverside and Oakland have each collected millions in fees and fines for registration and blight violations by major banks, much more than L.A.

Since then, we’ve gathered more evidence on the extent of this problem, after the Mayor’s office provided funding for a team of young “blight busters” who surveyed properties all over the city, under supervision from the LA Conservation Corps.

They found 450 blighted properties potentially subject to fines under the Foreclosure Ordinance.  As in an earlier survey, a few big lenders were responsible for almost half the problem properties.  The list is led by Bank of America, Bank of New York Mellon, Fannie Mae, JP Morgan Chase, Wells Fargo, Deutsche Bank and US Bank.  Some of these properties have festered like open sores on our neighborhoods for months.

Good Jobs LA assisted in filing complaints regarding about 50 of the worst properties on this list. As best as we can determine, no fines have yet been imposed on any of the scofflaw banks, neither now nor as a result of previous complaints we filed earlier in the year.

Good Jobs LA has submitted to the city a report including six specific recommendations for strengthening enforcement:

  • Support future citizen “blight brigade” efforts by assisting in training. This is the best way to ensure that complaints generated will identify actionable problems.
  • Make speedy inspection of properties identified by citizen complainants a top priority.
  • Strictly enforce the law, imposing all appropriate fines on all non-compliant owners of vacant foreclosed properties.
  • Use available data to focus proactive enforcement efforts on bank owned properties held by the banks which have been shown to hold the largest inventory of blighted properties.
  • Most important, start enforcing the provisions of law which specify a $1000 a day fine for failure to abate blight violations.
  • Prioritize the “easy” enforcement step of promptly inspecting all bank owned properties for posting of required notices. This may produce substantial revenue and, by encouraging compliance, it will definitely give neighbors the one tool they most need to demand cleanup of properties blighting their neighborhoods.

We estimated last June that the city may have foregone up to $45 million in revenue by failing to impose appropriate penalties on banks that fail to take care of foreclosed properties.  That remains true today.  This will change only when the LA City Council approves in final form – and the city administration implements – all the amendments to the foreclosure registry ordinance approved in June.

Councilman Garcetti spoke today in support of removing the registration fee exemption, saying that this was one of a number of pieces of recent legislation meant to hold banks accountable for how they have devastated our communities. He directed city officials to add our six suggestions into the foreclosure registry enforcement program and have staff report on their outcomes.

We will continue to fight for increased enforcement to make sure banks pay for how they have blighted our communities.

Next steps: 

In the next few months, the LA City Council Community and Economic Development Committee will hear amendments related to the Foreclosure Registry Ordinance enforcement program, which include raising the costs of registration to cover the costs of proactive inspection of foreclosed properties, requiring officials to levy $1,000 a day fines if blight violations are not remedied within the 30 day notice period, compelling banks to make reports on properties every month to Foreclosure Registry Program staff, and requiring a monthly report from responsible city staff to city council about the progress of the program.

Good Jobs LA and our community partners will continue fighting for stronger enforcement to hold banks accountable for cleaning up the mess they made in our communities. LA cannot leave this money on the table, and our communities won’t take living with bank blight.

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