Jose Rodriguez, a stocky auto mechanic from Jalisco, Mexico, stood in a vacant plot in Richmond’s Iron Triangle, and told police that he didn’t want to leave. “I like this property, I’ve already spent $5,000 repairing it,” Rodriguez said. “I didn’t do anything wrong.”
Rodriguez has transformed the roughly 1,000-square-foot piece of foreclosed grass on 1st street. He built an outdoor kitchen, equipped with a working stove and stocked pantry, encased the perimeter with a particleboard fence, and painted a bright portrait of the Virgin Mary on a wall of the abandoned home in which he had taken up residence. “If I have to pay to get the house I’ll do it, I don’t want to sleep in the streets,” he said.
Rodriguez is occupying one of the many so-called “zombie foreclosure” sites in Richmond, meaning that the bank, upon foreclosing on the homeowner, never took ownership of the home. The practice allows banks to avoid liability. It also increases blight, and makes it difficult for the city to manage abandoned properties, which often turn into blighted eyesores.
People like Rodriguez have taken advantage of the situation. While the plot he occupies on 1st street is slated for demolition, he shouldn’t have a hard time finding another abandoned home to live in. There are 432 homes in some form of foreclosure in Richmond, according to data from RealtyTrac, an online real estate information company. And 13 percent of all the foreclosed properties in Contra Costa County are zombie titles.
“I began working here back when the foreclosure crisis started, but this is an even bigger crisis,” said Tim Higares, manager of Richmond’s Code Enforcement Unit, which is in charge of cleaning up blight. “These homes are sitting in this purgatory, and the city is left to figure out what to do with them.”
In California, the average amount of time it takes for banks to foreclose on homes after sending a notice has more than doubled since 2007—from 154 days to 383 days—according to RealtyTrac. As a result, there were more than 29,000 zombie titles in the state as of March.
In Richmond, this has left the city responsible for maintaining scores of abandoned homes that have no clear owner. “There’s no easy solution right now for zombie properties,” Higares said, “and they destabilize neighborhoods.”
Jake Lawlor, who lives in Richmond’s North East neighborhood with his wife and 16-month old daughter, has watched a zombie home adjacent to his deteriorate over the past two years. “It’s not exactly falling apart, but it is super overgrown, it has a drab, peeling paint job,” he said.
The previous homeowner bought the property in 1993, according to the county assessor. Two years ago—after falling on hard times due to illness—the woman left the 3-bedroom house, Lawlor said. However JP Morgan Chase didn’t take ownership of the property until last March.
Over the years the home attracted waves of squatters. “Not knowing who’s in that house at any given time is unnerving,” Lawlor said. “The entire neighborhood is a little on edge about it, we just really want to get that place boarded up, or sold, or demolished, or something.”
Code enforcement fixed the property a few weeks ago—two years after they received the initial complaint from Lawlor. “We’re one of the best equipped code enforcement offices in California,” Higares said. “But we could double our staff and we would still just be able to scratch the surface of the problem.”
Using estimates from the federal department of Housing and Urban Development, the 432 foreclosed homes in Richmond will cost the city $8.3 million. However, that figure doesn’t take into consideration the economic impact on nearby homeowners, or the many zombie properties in the city.
It also doesn’t measure the social impacts of widespread foreclosures. “There’s a strong, proven connection between blight and crime,” Richmond Police Chief Chris Magnus said. “Code enforcement is one of the most important crime fighting tools we have.”
In 2008, the Richmond Council passed an ordinance allowing the city to collect $1,000 a day from banks that—after receiving a 30-day notice—still failed to maintain their foreclosed properties. Between 2011 and 2012, these fees brought in nearly $1 million for the code enforcement unit, according to its records. With an annual budge of about $4.5 million, this was a considerable source of revenues.
However, as banks have stopped finalizing foreclosures, returns from these fees have plummeted. “This year, the fees we’ve collected have been almost insignificant,” Higares said.
Many speculate that banks are stalling foreclosures for financial reasons, especially in low-income areas. “If you look at the numbers it would cost more to foreclose than it would not to in some cases, because of all the costs associated with the foreclosure process,” said Darin Blomquist, vice president of RealtyTrac. “It ends up being way above and beyond what they could recoup by selling the property.”
Keeping homes out of foreclosure also boosts property values. “It’s part of the incredible manipulation of the market that we have right now,” said Maeve Elise Brown, executive director of Housing and Economic Rights Advocates. “You have entities that are trying to show inventory…in drips and drops because they want to artificially prop up prices.”
Kevin Gould, senior vice president of the California Association of Bankers, said foreclosures are taking longer now because of state and federal regulations—not to boost banks profits. He also noted that whenever a foreclosure sale is postponed, the bank notifies the previous homeowner.
However, Brown said that doesn’t always happen, and that zombie foreclosures can haunt homeowners for years upon years. “The servicers or lenders are simply postponing the inevitable for their own gain,” Brown said. Meanwhile, “they’re also postponing the ability for a homeowner to recover.”
If you’re worried that you are still the title-holder of a zombie mortgage there are a few things you can do. Scott Schang, manager at Broadview Mortgage in Orange, California, said the first step is to call your lender and ask what the status of the property is. “There are quite a few stories of people coming back and saying the banks were very cooperative,” he said. If you’re still the title-holder, Schang recommends finding a realtor and initiating a short-sale process, in order to get off the title. RPD encourages any residents concerned about blighted properties to contact code enforcement at: (510) 231-3043.