Why Using Foreclosed Properties During Disasters Could Be Disastrous
A news report this morning about how Florida officials were considering using foreclosed homes to house residents when hurricanes and other disasters strike caught my attention.
As soon as I heard the report, I could almost hear the bank executives grumbling and offering a bunch of excuses about why this is a terrible idea.
Banks don’t want to take on any risks and liabilities associated with being a landlord. That’s why they’ve been so eager to evict tenants who are living in foreclosed properties here in Massachusetts and in other parts of the country.
Here’s what the CEO of the Florida Bankers Association told a local newspaper about the idea of housing hurricane survivors in foreclosed properties:
“Who doesn’t want to help Florida families after a hurricane? It’s an idea worth examining. But there are just a lot of legal obstacles in the process.”
Some of the vacant foreclosed homes aren’t safe to live in, and have been stripped of even basic appliances.
Who would be responsible for making sure that the home was safe and met local building code standards?
And what would happen if a disaster survivor moving into a foreclosed home destroyed the property? How long could the hurricane victim stay in the home? How much would they have to pay?
Too many questions for banks already struggling to manage their REO portfolios and rewrite loans for homeowners who can’t keep up with mortgage payments …
Here in Massachusetts, there are laws in place to protect tenants. Many attorneys say the pro-tenant laws and rules are so stringent it makes it tough to be a landlord in Massachusetts.
A local attorney once told me that one of the reasons banks and other lender refuse to accept rent payments from tenants living in foreclosed properties is because they don’t want to acknowledge that they’re a landlord.
“The national lenders don’t want to deal with the intricacies of the landlord-law here because once they do, they become liable as a landlord,” he told me.