Land bank provides solution for lender stuck with dilapidated houses

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Land bank provides solution for lender stuck with dilapidated houses

Cities have been tearing down crumbling, vacant houses for decades. The money for municipal demolition bills usually comes out of city budgets, but in Cleveland the housing crisis has started to change that equation, according to NPR [1].

The Cuyahoga County Land Bank, which started two years ago, now buys dilapidated houses and tears them down to remove eyesores from otherwise stable streets.

The land bank started two years ago, and then the economy worsened and the foreclosures piled up. Lenders stuck with crumbling houses found themselves on the hook in the Cleveland Housing Court for hundreds of thousands of dollars worth of code violations.

The Cuyahoga County Land Bank, a quasi-government corporation, offered lenders a deal: We'll take your worst houses, if you pay to knock them down. This year, Fannie Mae and some of the country's biggest lenders — including Bank of America, Citibank and Wells Fargo — will help pay for half of the land bank's 700 scheduled demolitions.

Lenders pay $3,500 to $7,500 per house. Wells Fargo's Russ Cross says it's a sensible and responsible business plan.

Some lenders are looking at starting similar programs in Detroit, Chicago and Milwaukee. Fannie Mae's P.J. McCarthy says the government-controlled mortgage giant has been donating properties and demolition funds to the Cuyahoga County Land Bank since 2009 because keeping the houses just doesn't make sense.

For more information: www.npr.org/2011/08/29/139971310/land-bank-knocks-out-some-foreclosure-problems [1]