Every now and then, I find myself privately rooting for and against both sides of a bill at the same time. I’m doing it again.
Two sides in Springfield are fighting over a rather unseemly and rapidly growing pile of auction fees created by the foreclosure crisis.
That’s a heckuva way to make a buck. Auctioning off what used to be somebody’s home and collecting a sweet little fee.
But, I suppose, somebody has to do it. You can’t leave foreclosed homes empty forever. They can become a blight on neighborhoods. The companies holding the mortgages often don’t take care of them and they crumble or are vandalized, or the yards aren’t maintained, or drug dealers or other criminals squat in them, or all of the above.
State law has long allowed private companies to conduct foreclosure auctions. The auctioneers appear to make a fairly decent living off of the business, particularly now that people are being kicked out of their homes at a record pace.
Counties, like pretty much every government everywhere, watched in horror as their tax revenues plummeted during the Great Recession. One of the very few growth areas was foreclosure auction fees.
The Bloomington Pantagraph reported the other day that foreclosure auction fees are now eight percent of the McLean County Sheriff’s total revenues.
But the sheriffs collect those fees only if they host the auctions. So some counties are either not allowing the private foreclosure auctioneers to do business or they are pushing judges hard to steer the auction dollars to sheriffs.
The private companies say they can handle the auctions faster and cheaper. The sheriffs say quicker auctions means impoverished, stressed-out homeowners are booted from their homes a lot sooner. That’s a very good point, and it’s one reason I’m so conflicted about this bill. On the other hand are all those abandoned homes, which, by the way, the sheriffs also have to worry about.
The Lake County Sheriff’s Office claims there were serious problems with private auctions, so it was forced to set up a system to address the complaints. However, under questioning at a Senate committee hearing, a sheriff’s staffer said she had heard only rumors and couldn’t substantiate — or even list — any actual homeowner complaints.
So, yeah. It’s probably all about the money.
Want more proof? The Senate’s sponsor offered an amendment to give the sheriffs $200 for each foreclosure auction handled by a private company. Two big counties Cook and Will, quickly switched from “opposed” to “neutral.” Getting something for doing nothing ain’t bad at all. But it costs very little to hold a sheriff’s auction. And the markup is so high that not everybody wanted to give up all that blessed cash.
Of course, some banks complained about the added cost of kicking $200 to the sheriffs, so the amendment hasn’t yet been officially adopted.
The bill requires judges to follow the wishes of the foreclosure plaintiffs, meaning the banks or other mortgage holders. Because the private auction companies say they are cheaper and faster, they think that gives them an edge. Opponents say cutting out the views of the defendants — the people who are being kicked out of their homes — is illegal and downright wrong.
Again, a good point. But I’d be more sympathetic if this fight between vultures didn’t make my skin crawl.
- wordslinger - Monday, May 16, 11 @ 7:52 am:
I don’t think there’s public interest in increasing the speed of this process. We’ve been in the midst of a nationwide fubar in which the banks were found to be racing through foreclosures, often mistakenly and without paperwork.
- Justice - Monday, May 16, 11 @ 8:00 am:
Look, there’s a poor sucker on the ground, let’s kick him and take his last dime!
Welcome to politics at it worst, maybe. When I think our moral compass is pointing to the deepest depths, we learn it can still go deeper.
Grabbing another ounce of flesh off the backs of people with nothing left to give is so, so sad…and wrong…just plain wrong!
- Cincinnatus - Monday, May 16, 11 @ 8:36 am:
Unless the government owns the property, there is no reason for it to be involved in these auctions which is a private transaction between the bank and the buyers of the property. Sheriffs’ are obviously in it for the buck, and the fact that the actions take place longer than the private companies shows two things:
1.) Government often is much more inefficient than the private sector.
2.) The glacial pace of clearing the inventory of foreclosed homes, and the propping up of the Fannies is lengthening the recessions. While I feel extremely sorry for those that are getting hit by foreclosure, the truth, backed up by statistics from Pew show that in those areas of the country where the Fannies encouraged lending to un-creditworthy individuals, there is an enormous amount of foreclosures. It was the injection of this $1T in bad paper due to bad regulation that contributed to the current recession. Furthermore, there is no correlation between unemployment rate and foreclosure rate, with areas of low unemployment rate among the highest in foreclosure.
Too many people were suckered into buying homes they clearly could not afford. But they were also participants in the process, and must assume some responsibility for losing their houses. It is only anecdotal evidence that links the recession to foreclosure rates, indeed the data suggests that people, with the backing of the government and shifty lenders, bought houses they clearly could not afford. Until this market is allowed to act without further Federal interference, I’m afraid this foreclosure picture is something that hasn’t yet played out.
- Louis G. Atsaves - Monday, May 16, 11 @ 9:13 am:
Let the local sheriff do it.
I have a few workers’ comp clients who have been foreclosed upon in recent years (yes Virginia, the benefits are not the horn of plenty everyone claims they are) and they come to see me with their final foreclosure orders.
In some instances they have some equity in the property they are entitled to but you need to get a court order to get the funds released to those foreclosed upon. The local court clerk then has to certify the order for the funds to be released.
Already overwhelmed by the process which basically is: “you owe the money, you are late, there is no other solution but to foreclose and take the property from you” these people have no idea how to prepare an order releasing any excess funds from the auction that may be due to them, or how to prepare a motion, docket it and then present it to court with proof.
Neither did I the first go around, I had to do some serious homework to get it right. A non-lawyer seems to get zero help from the court system in getting to what may still be owned to him.
When the funds are held by these “private entities” it takes longer to get the money back after you get the court order entered.
Let the local sheriff do it.
Take pity on those who unwillingly went through the system and are owed some money after the property is auctioned off.
- wordslinger - Monday, May 16, 11 @ 9:31 am:
I’m with Louis. Thanks for introducing some real-world experience to the discussion.
- Quiet Sage - Monday, May 16, 11 @ 10:07 am:
What made my skin crawl is that the bill passed in Senate Executive Committee 15-0, despite the serious concerns raised in committee by several Senators. It was quite clear from the committee testimony that this legislation will diminish the ability of foreclosed individuals to cut a last-minute deal allowing them to keep their homes. It was also clear that the legislation eliminates the proper role of judges in selecting auctioneers, whether private or public. These auctioneers are servants of the court, and the court should have the ability to select them. But the 15-0 vote in favor of passage shows that the banking lobby has an absolute lock on both parties in Springfield, as it does in Washington.
- Leroy - Monday, May 16, 11 @ 10:25 am:
Well, the housing bubble popped, taking with it all the real estate transfer taxes local governments were growing fat on collecting.
Now we are in the golden age of foreclosures, and the sheriff’s departments are growing fat by collecting all the fees associated with foreclosures.
I’m sure the sheriff’s won’t make the same mistake that was made with the real estate transfer taxes.
- Irish - Monday, May 16, 11 @ 10:28 am:
This story and Rich’s column on hostages very pointedly show that big business/banks have NO moral compass amd would grind the little people into the dirt of the road for a buck.
So before anyone with the idea of letting business guide us out of this recession convinces you to follow the lead of Wisconsin and others, re-read these two columns to understand what that will get you. All of the folks pontificating about how a return to the Bush era ideas and ideals is our only hope remember what got us here, and who ended up bailing out the greed driven corporations. The days of a company investing in your community, investing in it’s workforce, and having a social conscience are long gone. They will do whatever is required to earn that one extra buck, they will pollute, cheat, scam, and siphon the last drop of blood out of the local economy and then move on to dessicate another area.
- Cincinnatus - Monday, May 16, 11 @ 1:07 pm:
Irish said,
“This story and Rich’s column on hostages very pointedly show that big business/banks have NO moral compass amd would grind the little people into the dirt of the road for a buck.”
Leaving aside the fact that companies are entities and not people who can have an emotion, why does your group of little people matter more than the small investors who may have their retirement incomes coming from the profits of businesses? And if we reduce the profits of companies, what would they then have to invest to create new wealth which is what is used to create jobs for real people?
- Ghost - Monday, May 16, 11 @ 2:55 pm:
So the Sheriffs just want to wet their beak a little?
This is basically a tax on a private auctioneer for doing uisness. Given that the counties have to regulate and watch over the process, I am not opposed to this extra tax, BUT the counties should be held responsible for reualting and monitoring the prvt auctions if they are going to collect the money.
- Liandro - Monday, May 16, 11 @ 4:57 pm:
I’m not very knowledgeable on this topic, but fwiw I’m mostly with Word and Louis. Based on anecdotes and the occasional reading it seems that banks, etc., have far more incentive to foreclose then to work with homeowners. One of my military buddies who does appraisals now was telling me a little about it, too. I have a problem with that.
As a conservative I see the point Cincy is making, but it seems to me that if the legal system and the financial regulations (both at least partially creations of government) are tilted towards banks profiting more on foreclosures then working with the individual…well, that’s more then enough for this conservative, at least, to have doubts about the system.
Big government is bad, but big government teaming up with big business to screw individuals is even worse, no? The “it’s their own fault” argument doesn’t work well when playing field is tilted.