A Sanford man abandoned his home after he lost his job in 2010 and could no longer pay the mortgage.
What followed was a mess of red tape, delays and botched attempts at selling and foreclosing on a house from which he still isn’t free. The city leveled the decrepit home a year ago, deeming it dangerous. But the owner continued to be charged for lawn maintenance and property inspection. An empty lot is all that is left.
These stories are playing out across Maine, although numbers of dangerous properties in mortgage defaults are hard to come by. Part of the reason is the large number of federal mortgages in Maine and across the country with layers of loan servicers. Some homes have been hung up in the process since the mortgage crisis of the Great Recession.
Sanford, a York County city of 22,000, had the highest foreclosure rate in the state in 2008. It is still trying to whittle down its abandoned and dangerous buildings left standing from that era, Ian Houseal, the city’s community development director, said.
The City Council deemed 13 buildings to be dangerous or a nuisance between July 2020 to July 2022, with another eight declared dangerous through the end of last year. The City Council was scheduled to vote on three more on Tuesday.
In some cases, these declarations cause lenders or mortgage servicers to try to sell the property or refurbish the home. But in others, like that of the man who abandoned his home in 2010, it is too late. Time and neglect had damaged his three-bedroom home on Wilson Street beyond hope.
“I remember being at the site with the contractors there and hearing this buzzing noise in the house and realized a whole wall was moving in and out with the wind,” Houseal said. “There was no question the building needed to be demolished.”
Such homes are a thorn in the side of the city’s management and neighbors. The house was nice before it was abandoned and in a decent neighborhood. When it was vacated it drew frequent complaints from neighbors about the tall grass and vandals going in and out of it.
The Wilson Street home is what Aaron Lederer, Sanford’s deputy code enforcement officer, calls “an attractive nuisance.” Ironically, he also had inspected the property in his former job at Safeguard Properties, a management company hired by the mortgage servicer to walk through it monthly to check if it needed maintenance and to mow the lawn.
The saga on the property started in 2010 when the owner told his bank, Bank of America, that he had lost his job and could no longer pay the mortgage, Thomas Cox, his lawyer, said. The owner told the bank he was moving out and to another state to find employment. He had taken out the loan for $169,900 when he bought the house in 2005. He declined to be interviewed, letting Cox speak for him.
Bank of America, which was acting on behalf of loan holder Fannie Mae, asked the owner to arrange a short sale, something that happens when the asking price is less than the amount due on the mortgage. He did so, Cox said, obtaining two purchase offers for $82,000 dated May 30, 2011, which was $1,000 more than the valuation the bank had on it.
The bank then asked the owner to sign a new loan for $15,000 and pay $4,000 cash on a second mortgage he had with GMAC. He couldn’t afford either one, Cox said, because he had no income at the time. He wanted to pay the $4,000 from proceeds of the short sale. The bank would not allow it, and the sale fell through.
Two attempts at foreclosure, one in 2010 and another in 2013, were each dismissed. Other legal efforts were made unsuccessfully. So the property sat with loan servicers being paid to take care of it. But the home fell into such disrepair that Sanford’s City Council voted to demolish it, a task that was completed in May 2022.
Cox said such drawn out foreclosures typically don’t happen with Maine-based banks, which own the loans and want to protect their investments in mortgages.
Federal loans, including those from large mortgage holders such as Fannie Mae and USDA rural development loans, tend to have layers of companies handling the loans, foreclosures and property management. Fannie Mae and Freddie Mae held 60 percent of new mortgages nationwide during the pandemic, up from 42 percent in 2019, according to the Urban Institute.
Cox said if the loan on Wilson Street, which fell under Fannie Mae’s control, had been properly handled, either the short-term sale offers would have been accepted in 2011 or the lawyers hired by the Bank of America to represent Fannie Mae would have completed the foreclosure, with no opposition from the owner, by the end of 2011 or early 2012. The owner’s credit would have been restored by now, Cox said.
Instead, the loan servicers have delayed the process for more than 12 years and charged Fannie Mae $41,000 in fees to manage the property. Cox wrote in a complaint to the Federal Housing Finance Agency, which supervises Fannie Mae.
“And after all of that, the building on the mortgaged property has been demolished, and the city of Sanford is about to impose a $19,300 tax charge on the remaining land for the demolition costs,” he wrote. “The servicers for Fannie Mae and their lawyers hired by them should be held accountable for the misconduct.”
The whole process also rankles Houseal, who sees it as a “failure of government agencies to foreclose on these properties.”
Last month, a state judge signed a foreclosure order for the property. The owner’s debt had more than doubled to top $400,000 since he bought the house. But under the judge’s order, he does not owe any money, Cox said.
The state has no data on how many people in Maine have had similar experiences, but the Maine Bureau of Consumer Credit Protection gets copies of the default letters sent to homeowners, Mark Susi, a lawyer for the bureau, said. The bureau sends owners information to help them deal with foreclosures but has no records of what happens with properties.
Susi said that after a judge signs a foreclosure order, the homeowner normally has 90 days to pay everything that is owed and keep the property. If the owner does not pay up in that time, he still owns the property but the mortgage company is required to advertise the property within the next 30 days and hold the sale within 45 days. The judge’s order waived the 90-day period so the property could go up for sale immediately.
He no longer has to pay the maintenance and inspection fees, which had continued after the home was demolished in May 2022, Cox said. Lederer said from his experience the servicer businesses will continue cutting the grass and inspecting pretty much automatically until told to stop.
Cox, a Portland-based lawyer whose pro bono work helped expose the recession-era “robo-signing” scandal, is frustrated by not being able to do anything about foreclosure handlings so slow that homes fall apart during the process, especially at a time when Maine has an acute housing shortage.
He said one thing Sanford has done to discourage home abandonment is that it charges for permits for empty homes and increases the charges over time. That may be part of the answer to what is a much bigger problem, Cox said.
“What can we do to prevent this?” he said. “That’s the dilemma for me.”