Two years ago, Los Angeles amended its two-year-old ordinance requiring owners of foreclosed properties to register them with the city's housing department because, as private data service RealTrac described the situation at the time, “no banks have been fined for violating the ordinance, even though the city is riddled with blighted bank-owned (REO) homes.”
So how did that work out?
“The city has never imposed the up to $1,000-a-day penalty that the registry law allows on negligent owners who fail to live up to city codes,” the Los Angeles Times reported last Friday. “Nor has it issued one of the $250-a-day penalties the law created for failing to register a foreclosure.”
The registry was created to “protect [Los Angeles] neighborhoods from becoming blighted.” By requiring immediate registration of the property, it could be quickly inspected and kept in decent shape until resold. Theoretically.
The registry had 9,200 listings of foreclosed properties last year, bringing the four-year total to 32,000. But the city only takes a look at them if there is a complaint. “Our inspectors are really busy,” Luke Zamperini, spokesman for the city's Division of Building and Safety, told the newspaper. “We can't afford to be driving around the streets looking for work.”
Two years ago, Times columnist Hector Tobar was gobsmacked by a similar acquiescence. “Call me naive, but I still find it shocking to hear a government official, in the United States, admit that a recently enacted law isn’t enforced.” he wrote. “Why did the City Council pass it in the first place? For show? Is it governing that's going on over in City Hall, or just theater?”
If it is theater, it's a rerun of a something no one wanted to see in the first place. “This ordinance has been in effect for four years, and they haven't collected one cent,” housing activist Betty Steele told the newspaper. “We're sick and tired of it.”
Foreclosure registries exist across the country and, like many of the programs aimed at helping those harmed by the housing crash of 2007 who are not bankers, they have faltered from lack of funding and political support. “Code enforcement is one of the most critical tools to counter blight,” according to Ascala Sisk, director of a D.C.-based non-profit involved in foreclosure relief. “But municipal budgets are struggling. It's a really under-resourced area.”
The city tried to do something about that “under-resourced area” in 2012 when it amended its ordinance to eliminate a loophole that let owners of foreclosed properties avoid paying the city $155 to register by entering them into the Mortgage Electronic Registration System (MERS) instead.
MERS was created by big banks in 1995 to replace local county recording of property transfers, allowing them to group mortgage debt into larger investment vehicles that could be loaded up with crap and leveraged in a marketplace hungry to buy it and sell it to the next investor. Among its features was an ability to obscure true ownership of a property in a tranche of other investments. About half the nation's home loans are registered in MERS, which has multiple lawsuits pending against it.
MERS was getting a lot of heat nationally in 2012 when the City Council rewrote its ordinance. But the lawmakers did not pass a proposal from then-Councilman Eric Garcetti, now L.A.'s mayor, to nearly triple the fees and use the money to hire six more inspectors. It is still bottled up in committee.