Wow. So what happens when the bank decides to cancel the foreclosure auction? The property goes into limbo. The title is still in the “owner’s” name. The city can go after the title holder for maintenance and vandalism problems, which can strike them completely unaware if they vacated the property before the cancelled foreclosure auction.
Maybe we should just bulldoze unwanted houses, if the vacancy rate in certain cities is too high? It’s not going to happen here in Los Angeles I suspect, but it would be one way of propping housing values up. Just eliminating 25% of available homes on the market would have some affect.
The so-called bank walkaways rarely mean relief for the property owners, caught unaware months after the fact, and often mean additional financial burdens and bureaucratic headaches. Technically, they still owe on the mortgage, but as a practicality, rarely would a mortgage holder receive any more payments on the loan. The way mortgages are bundled and resold, it can be enormously time-consuming just trying to determine what company holds the loan on a property thought to be in foreclosure.
In Ms. James’s case, the company that was most recently servicing her loan is now defunct. Its parent company filed for bankruptcy and dissolved. And the original bank that sold her the loan said it could not find a record of it.
So if the bank could not find a record of the loan, and everyone involved in collecting the loan is defunct or missing, does the property just revert back to the title holder who couldn’t pay the mortgage? I never thought housing could be free, but that is an interesting way to get it.