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Abstract

As the rate of mortgage foreclosures has risen, the plight of evicted homeowners and the significant financial losses for banks have become common knowledge. Remarkably absent from the discussion, however, has been the extreme hardship placed on municipalities. Municipalities face not only increased crime, neighborhood blighting, and severe public health and safety risks, but also great financial burdens. This economic strain is amplified by what has become a sort of “foreclosure game” for many foreclosing mortgagees. In short, some mortgagees evict homeowners in the midst of foreclosure proceedings, elect not to maintain and repair the subject property, and in some instances simply walk away from the property before foreclosure is complete. While the buildings deteriorate, municipalities face the difficult decision of whether to repair or demolish abandoned homes with limited prospects of repayment or recovery of the accompanying expenses. Lenders likely need not pay because they are not the record owner of the subject property. The true record owner just lost her or his home and is likely not willing, or financially able, to reimburse the municipality. In addition to highlighting the origins of the municipalities’ problems, this article requests local legislative intervention, followed by statewide action, if necessary, to correct the deficiencies present in the current foreclosure system and to insulate municipalities from the resultant burdens. Mortgagors and mortgagees, not the municipality in which they happen to live or do business, should be held responsible for the economic and social costs their decisions create. The current mortgage crisis has undoubtedly exacerbated this problem and, consequently, provides an ideal environment in which to correct it.

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