Author: Tim Ballering

The Milwaukee Journal reports that Representative Evan Goyke has introduced a series of bills to address foreclosures.  The 5 bills as described by the authors are:

1. Realtor Incentive Bill (LRB-3010) – This bill seeks to create an incentive for realtors to sell properties that have a foreclosure judgment and a sale value of less than $50,000. It is our hope that this incentive will attract realtors to invest more time and energy in the foreclosed home markets and neighborhoods. The bill would remove income tax reporting requirements for the commission income made by a realtor working as the agent for either the buyer or seller of the property.
2. Demolition Bond Bill (LRB-2431) – This bill is designed to ensure that municipalities do not bear the financial burden of demolition of a property when the lender initiates a foreclosure action. The bill would require, as a matter of civil procedure at the time of filing a foreclosure action, that the plaintiff in the matter post a demolition bond of $15,000.  The bond will be held by the clerk of courts for the county in which the foreclosure action is filed.  In the event that the property is neglected, deteriorates, and becomes a blighted property in need of demolition, the $15,000 demolition bond will be applied for the cost of demolition.  In the event that the property is no longer owned by the plaintiff in the foreclosure action, the demolition bond shall be returned to the plaintiff.  Similarly, in the event that the foreclosure action is dismissed, the demolition bond shall be returned to the plaintiff.
3. Security Lighting Bill (LRB-2774) – Under current law, mortgagees may file a foreclosure action against a borrower when the borrower meets certain criteria regarding non-payment.  The plaintiff mortgagee in the lawsuit must pay a filing fee with the appropriate county clerk of courts to initiate the lawsuit.  In general, these fees are used to pay the operational costs of the court. Under this bill, the filing fee for each foreclosure action is increased by $50.00 with the additional filing fee being routed by the county clerk of courts to the designated department for installation of lighting on existing abandoned homes.  The lighting that shall be used shall generate and regenerate its own power through solar energy (as by definition, the existing foreclosed homes do not have electricity running to them). The lighting will help deter theft and vandalism to abandoned properties.
4. HOME GR/OWN Bill (LRB-2368) – Earlier this year, the City of Milwaukee was a finalist in Former Mayor Bloomberg’s Philanthropies’ Mayors Challenge, which was a competition created to inspire American cities to generate innovative ideas that solve major challenges and improve city life. Milwaukee became one of the top finalists based on the City’s innovative idea to transform foreclosed properties into community assets that improve public health and spark economic opportunity. Unfortunately, Milwaukee was not chosen as one of the recipients of the reward, but we feel this should not deter Wisconsin from pursuing the goals of the challenge.
5.  Property Stabilization Bill (LRB-3431) – Current law does not allow municipalities or lending institutions the authority to enter into a property that is subject to a foreclosure action.  When the property is abandoned, this may lead to deterioration of the property, which greatly decreases the property’s resale value and places additional burdens on local property tax payers. This bill seeks to extend authority to a municipality or lending institution to enter the foreclosed property and address any possible problems within the property, such as winterizing the plumbing. This bill also seeks to extend civil immunity to agents of either the municipality or lending institution engaged in the rehabilitation or repair of the property, so far as the agent is acting in his or her official capacity in carrying out actions allowable under this bill.

Something must be done to address this problem. But remember we are at this point because the government at many levels encouraged the purchase of homes by buyers who were ill prepared for homeownership and without the financial resources to weather the smallest of storms. These policies drove sales prices to unsustainable levels. We now pay the price.

At this point many of the vacant foreclosures need to be bulldozed as they have been gutted by thieves looking for a few dollars in copper to buy their next fix.

Rep. Goyke’s proposals, while good for starting a conversation, for the most part are unwise.

I doubt the IRS is on board with the non reporting of commissions.

The demolition bond has the potential of causing far greater problems than it cures. Already today banks are refusing to take possession of foreclosed properties. Many owners believe they were foreclosed upon and moved out only to find the city hunting them down for fines and fees because the banks never took possession. One such case, Bank of New York v. Carson, recently was heard by the Court of Appeals.

We;ve already seen cases where the lender has sued on the note, but as civil cases rather than foreclosures, leaving the title in the buyer’s name along with the liens for mortgages and the court judgments. Mr Goyke’s proposed bond will cause more incentive for banks to do this, creating a larger amount of Zombie housing, i.e. housing that can never be sold due to the liens and title problems.

I do however like the proposal to install solar powered security lights, if they are vandal proof.