Some banks don't record deed in foreclosure, neglect property
Like homeowners who can't afford mortgages, some banks temporarily “walk away” from foreclosed properties by not recording deeds.
The tactic creates headaches for municipalities because code enforcement officers don't know whom to cite if violations occur.
“I have at least three properties I am working on right now that are like this,” said James Tunstall Sr., code enforcement officer for Millvale. “This is a constant battle to have them cut the grass or do other repairs needed on the home.”
Failing to quickly record deeds is another twist to a familiar issue. Critics point out that banks across the country fail to maintain foreclosed homes, especially in predominantly minority communities.
Wells Fargo, one of the country's biggest mortgage lenders, agreed this month to spend at least $42 million to settle allegations that it neglected foreclosed homes in black and Latino neighborhoods. It did not admit wrongdoing. Other banks face similar accusations.
Banks say skirting maintenance is not the reason for apparent delays in filing deeds to properties they take from homeowners. Sometimes it's simply an unintended consequence of processing paperwork because of bank bureaucracy.
Yet for some, it might be a conscious decision.
“Ninety-nine percent of the foreclosed properties we take back in our name we attempt to sell, and once a sale is completed, we ask the sheriff's office to issue a deed in the name of the new owner,” said Jack Shelley, senior vice president at Dollar Bank.
Typically when a home sells, an escrow agent records the deed for the buyer on closing day or soon after. The name on the last recorded deed becomes the owner of record — responsible for taxes and maintaining the property according to municipal regulations.
With foreclosures, a bank does not get the deed until 30 days after a sale, to give the foreclosed homeowner time to appeal, said Sgt. Richard Fersch with the Allegheny County Sheriff's Office.
“Many (banks) simply don't accept the deed issued after they were the successful bidder on a property sold at a sheriff's sale,” Fersch said.
If a bank does not record a deed, the foreclosed homeowner remains the owner of record with the county Department of Real Estate, he said. That can present problems for code enforcement officers.
“It may take a month or longer to go through the process of locating the legal owner of the property, because most banks that have foreclosed on the site — particularly those banks headquartered out of state — don't normally record a deed in their name,” said Rodney Sarver, building code officer for Bethel Park.
Tracking former owners is difficult, and if they're found, they usually deny ownership because of the foreclosure, Sarver said.
County tax bills for the property will lead him to the bank, but out-of-state banks sometimes promise to hire a maintenance company and then do not, he said.
The problem of abandoned and deteriorated housing in Braddock is not improving, said David Andrews, building inspector.
“I have 350 vacant houses on my demolition list,” he said. “When I locate an owner of one of these houses, I take them to court. And often the banks that take over ownership of these houses don't maintain them.”
Wayne Washowich, code enforcement officer in White Oak, said that if a bank fails to maintain a foreclosed property, “we will hire an independent lawn company to cut the grass.”
White Oak wants to keep neighborhood eyesores from causing property devaluations, he said. The borough pays the lawn firms, then places a lien on the property.
Pittsburgh's PNC Bank, one of the largest in the country, takes responsibility for its foreclosed properties, said spokeswoman Marcey Zwiebel. How soon PNC files a deed in its name can depend, since regulations vary by county, Zwiebel said.
Pete Jaworski, chief credit officer at Wesbanco, which acquired Fidelity Savings Bank in November, said the Wheeling, W.Va., bank has not been in the Pittsburgh market long enough to establish a policy on deeds.
“In other areas, based on the rules and regulations of those municipalities, the deed has taken a month or longer to record,” he said.
By not immediately filing a deed, Fersch said, “banks are not paying transfer taxes.”
Some attorneys who specialize in sheriff's sales contend that “when the hammer falls, the bidder on the property becomes the equitable owner of the property, whether it accepts the deed or not.”
That bidder has agreed to pay whatever costs are on the property, the attorneys argue.
“If the bank accepts the deed from the sheriff's office following the sale, the bank is the legal owner of the property, regardless of whether the deed is recorded,” said Stephen Papernick of Papernick & Gefsky, a Monroeville law firm.
Some banks are limiting or stopping foreclosures.
Wesbanco slowed its pursuit of foreclosures, mostly because the economy improved, Jaworski said.
Others are refusing to complete foreclosures because they don't want to pay to maintain homes, said Thomas Fitzpatrick, an economist with the Federal Reserve Bank of Cleveland, which has a branch in Pittsburgh.
“It may cost more to cure the back taxes and bring the property up to code than they could ever get from selling the property itself,” he said.
Municipalities handle it
To resolve the problem, Fersch said Allegheny County Council passed a May 2011 ordinance requiring banks to record deeds within 60 days. The county permits an extra 15 days under certain conditions, such as a pending sale.
“Until that ordinance was passed, banks would take the deed on the foreclosed property, but many did not record it until they had found a buyer. Then they would hurry up and record the deed and complete the sale,” said Jim Uziel, deputy director of the county Real Estate Department.
“Now when the time period expires and they haven't sold the property, the sheriff's office will bring the deeds to be recorded with the $150 recording fee.”
Pittsburgh Councilman R. Daniel Lavelle, D-Hill District, has introduced legislation to fine lenders $100 a day if they permit property code violations to linger.
Westmoreland County Sheriff Jonathan Held is working with the Recorder of Deeds Office on a plan to record a deed in a bank's name automatically after a foreclosure sale. Still to be resolved, however, is who pays the recording fee.
Washington County uses the “Portnoff solution.” Named for a Philadelphia law firm, Portnoff Law Associates, that plan allows homeowners facing foreclosure to remain in their homes by paying real estate taxes to a law firm. A number of municipalities, school districts and authorities use the system.
Sam Spatter is a staff writer for Trib Total Media.