You might have read the news yesterday that Atlanta issued an arrest warrant for Jamie Dimon, the CEO of superbank JP Morgan Chase. The city wanted someone to clean up the thousands of tires that were piling up on a vacant property. Well, Obama’s favorite banker is free again to fly into Hartfield-Jackson and not be worried about getting cuffed. The Atlanta Solicitor General’s office revoked the an arrest warrant for the executive, after some lawyering from the bank. But the incident probably foreshadows what we are going to be seeing more of in the near future: More anger and legal issues directed toward the bank over foreclosures and foreclosed properties. Now that the bonus season is over expect this to be the main focal point of hatred towards the banks. Here’s why:
The problem of foreclosed homes falling into disrepair has been a problem for a while. Mid-last year, RealtyTrac estimated that banks owned about 600,000 homes that they had foreclosed upon and not resold. And that’s just the houses they have foreclosed upon. There are potentially tens of thousands of more homes where owners are no longer making payments, but banks have been slow to initiate foreclosure proceedings, either because they don’t want to have to take care of the house, or pay taxes, or because of pressure from the government to allow modification programs to happen. And with the government announcing new loan modification plans, expect more of these houses to hang around in limbo for a while. That’s not a huge amount given that there are over 100 million homes in the United States, but those homes are not spread evenly around the country
But what is happening now with the market coming back slightly is that some of those homes are being sold. Contractors and flippers are coming in and gutting the houses. Those that remain vacant are then becoming magnets for all that trash. Banks own a lot of these properties, and hire companies to take care of them. But trash from all the other homes that contractors and flippers are dumping on the properties is piling up faster than banks can clean the stuff away. In Atlanta, where JP Morgan ran into trouble, it appears that foreclosure properties and vacant lots have become a major source of public disdain. Atlanta’s commissioner has set up a dedicated hotline to report illegal dumping, and some residence have taken the issue on as a pet project.
In Oakland, the city has secured $5 million in federal funding to clean up as many as 200 properties. As the vacant houses and lots become more and more of an eyesore and more and more of a drain on public funds, you are sure to hear more anger directed toward the banks that either own the properties or made the loans that ended in foreclosure.