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L.A.’s Foreclosure Registry ‘Flawed’


A city program intended to penalize banks that fail to maintain foreclosed properties has been   “ineffective” and should be overhauled, City Controller Ron Galperin said today.

An audit found the program, started four year ago to track foreclosed properties and prevent blight, never went after lenders that let residential properties to go derelict, Galperin said during a City Hall news conference.

“The city has been ineffective in both tracking the foreclosures and in preventing and abating neighborhood blight,” he said.

Though created “with the best of intentions,” the program “hasn’t been performing up to expectations,” he said.

Even though the city collected $5 million in registration fees from banks since the program was established in 2010 until March 2014, officials have yet to conduct property inspections nor impose fines on banks that do not maintain foreclosed homes in their possession, he said.

The city used some of the $5 million for “ongoing activities of the foreclosure registry” and still has around $3.7 million left, Galperin told City News Service.

Galperin’s audit concluded city staff were stymied by the way city leaders crafted the ordinance setting up the program.

The foreclosure registry lists properties when a “notice of default” is issued – a practice Galperin said is “too early in the foreclosure process” because banks may not yet legally own or have access to the properties. The practice makes it more difficult for city inspectors to zero in

on which properties to inspect and hold the banks accountable, he said.

Galperin recommended that the program employ a more “high-tech” process involving an automatically updating “georegistry.”

He also recommended that “detailed information” be provided to city departments and “decisions makers” so they “can actually do what needs to be done when we identify blight our neighborhoods.”

He said these suggestions are aimed at reforming “what is now an ineffective program and create an invaluable tool for cities to actually combat neighborhood blight.”

“When blight arises, it poses a threat to residents, to neighbors, to all of our communities,” he said. “It costs us in lower property values as well, and in revenues to the city.”

The controller was joined by Councilman Gil Cedillo, who said the ordinance that created the program “was inherently flawed in allowing properties to continue to be eyesores in our community.”

“This specific ordinance has been a tool that has been underutilized,” he said.

“Unfortunately, court rulings have prevented us from moving forward with amendments to our current law, to give us the authority to enforce additional penalties and policies, but with today’s report we have finally seen clarity and we will continue to champion the changes that need to be done legislatively,” Cedillo said.

A federal judge ruled last year that lenders Fannie Mae and Freddie Mac do not need to comply with a similar ordinance in Chicago, according to Cedillo’s office.

The councilman suggested in a motion introduced today that lenders be required to pay an inspection fee when the property’s status changes from “notice of default” to “real-estate owned.”

“This will allow for a pro-active approach” to prevent blight “caused by the foreclosure crisis,” he said.

His motion also calls on Building and Safety officials and other city staffers to report on fees that will be used toward inspections.

He also asked for a report on the number of properties that should have been registered, but were not; the amount of penalties the city could collected for properties that went unregistered; and plan for informing banks of the $250 a day penalty for failing to register.

He also called for costs estimates for upgrading the registry technology “to allow for better coordination between the Building and Safety Department and any other involved departments.”