SAN MARCOS: City hopes new law will get banks to maintain foreclosed properties

Violators face fines of up to $1,000 a day for weeds and other 'blight'

By ANDREA MOSS - Staff Writer | Saturday, October 11, 2008 4:04 PM PDT ∞

SAN MARCOS ---- Faced with a proliferation of dead lawns and weed-filled yards at foreclosed homes, city officials are hoping to use a new state law to force banks and mortgage companies to maintain the properties they take back.

Karl Schwarm, San Marcos' director of housing and neighborhood services, said last week that he plans to ask the City Council this month to let the city levy fines of up to $1,000 a day against owners who fail to keep up foreclosed properties.

Such fines became possible in July when Gov. Arnold Schwarzenegger signed Senate Bill 1137 into law. Formally known as the Residential Mortgage Loans Foreclosures Procedures, the law spells out the responsibilities regarding foreclosed properties of banks and mortgage companies.

San Marcos considered using the law last month after City Councilman Chris Orlando noted that foreclosed properties were creating blight in otherwise attractive neighborhoods.

"We have some areas in town that are starting to show those effects," Orlando said last week. "The city manager said it isn't a large problem yet. But that's exactly the sort of thing I want to stay on top of and make sure it doesn't become a problem."

Officials in other North County cities said they were using local zoning codes and property maintenance laws to address the problem with mixed results.

Escondido code enforcement manager Leslie Milks said her city recently created a task force to explore other ways of dealing with the issue, as well.

And last week, the Escondido City Council tentatively approved tightened maintenance rules that set the stage for the city to take more aggressive action against banks, mortgage companies and property managers that do not keep up their properties.

Oceanside's code enforcement manager, David Manley, said city officials were considering adoption of a law that would require lenders to notify the city of properties they foreclose on --- and to maintain those sites.

Attempts to find out what bank officials think of such actions were unsuccessful. Officials at several banks that have foreclosed on local properties did not respond to messages left for them.

Exacerbated by crisis

Maintenance often becomes an issue at a foreclosed property because many defaulting homeowners abandon their homes once they learn their lenders' plan to take the properties.

That can leave a home in maintenance limbo during the 60 to 90 days it takes to complete the foreclosure process.

"Unfortunately, that's when the grass dies and everything gets brown," said Schwarm. "During that time, the homeowner usually doesn't care what anybody does to him because he doesn't own the property anymore."

Even after a bank or mortgage company takes possession of a home, it can be several more weeks before a company representative visits the property, Schwarm and officials in other cities said. A foreclosure spike brought on by the ongoing mortgage and housing crises has exacerbated the problem, they said.

Data from ForeclosureRadar, a Northern California research firm, shows the number of North County homes seized by banks and mortgage companies in August was more than double the number of foreclosures during August 2007. Last August, the latest month for which data was available, San Marcos had 69 foreclosed homes. Oceanside had 174, Escondido had 145, Vista had 87, Carlsbad had 18, Poway had 13, and Encinitas had four.

ForeclosureRadar's data also lenders had started but not yet completed foreclosure proceedings on many more North County properties.

ZIP code maps maintained by the research firm showed the foreclosures spread throughout each city ---- a trend North County city officials said they had noticed as well.

"You really can find it in almost any neighborhood," said Escondido's Milks. "It's citywide ---- your higher-income areas, your lower-income areas."

As the problem escalated, she and other officials said, most banks have gotten better about making sure the properties they seize are maintained. But that is not always the case, especially with out-of-town lenders who may be dealing with hundreds of foreclosed properties each, they said.

"We still have trouble sometimes getting them to be cooperative or take action right away," Milks said. "I think they're overwhelmed with the situation."

Dragging others down

A resident of San Marcos' upscale San Elijo Hills development who declined to give her name said she and her neighbors know what it's like to watch a once-attractive property become the neighborhood eyesore after going into foreclosure.

Built about two years ago, her Verzano neighborhood is filled with large, two-story homes surrounded by neatly kept yards and manicured landscaping. Recent months have seen a number of properties being foreclosed on, though, the woman said.

Neighbors were pleased to see a bank that took over a Driver Street house keep up the property, which was recently sold to a new owner, she said. Just a couple doors down, though, a Weatherstone Way house taken by a bank about three months ago now has a dead lawn that stands out like an ugly brown stamp of shame among its green neighbors.

"We wanted to water it, but the bank refused to let us," the woman said of herself and other nearby residents. "They even sent somebody out to put a lockbox on the water (system for the house). And now they won't even contact us."

A management company that represents the Verzano Homeowners Association has repeatedly tried to reach people at the bank as well, to no avail, she added.

"I know this (foreclosure problem) is happening all over," the woman said. "But these banks, they've got to keep them up. You can't let the whole neighborhood start looking bad."

Cities typically have an array of zoning codes and public nuisance laws aimed at getting owners to maintain their properties to specific standards. Violators face fines that typically start at $100 a day.

North County city officials said they use those codes and laws to get banks and mortgage companies to clean up foreclosed properties whenever possible.

Abatement ---- in which a city hires a contractor to clear weeds that present a fire danger or perform other work deemed necessary for safety reasons ---- is another option. The cost of the work is then added to the annual tax bill for that property.

An extra tool

However, existing codes and laws do not require property owners to cut their grass regularly, water their plants or perform other work that helps keep a property from looking bad. Manley said that is why Oceanside is considering a property registration ordinance.

"It actually requires lenders and owners to notify the city when they do a notice of default. At that time, they would also have a property management company file a registration with the city, keep it maintained and give the city the authority to 'cure' the problem, if necessary," Manley said in referring to the abatement process.

The maintenance requirement changes planned in Escondido would expand the definition of who can be held responsible for property maintenance to include lenders and property managers. The revisions also would enable the city to go after lenders who fail to keep properties up more aggressively, including potential civil lawsuits and the attachments of public nuisance notices to property titles.

Officials in other cities said the issue was less of a problem for them, though they were keeping tabs on it.

Bob Manis, director of development services for Poway, said that if someone walks away from a home, finding someone to assume responsibility for taking care of the property can be a problem. Banks have generally been responsive once they take over, though, he said.

"Under a dozen have risen to the point where we've actually gotten involved," Manis said.

Pat Murphy, director of planning and building for Encinitas, said his city has gotten off relatively easily so far when it comes to properties falling into disrepair. Even so, he said he understands that cities must be aggressive if they see the problem growing.

Schwarm said San Marcos officials see the new state law as another tool for code enforcement officers. The possibility of $1,000-a-day fines is expected to get lenders' attention, he said.

"Whether it will be effective, I don't know," Schwarm said. "We're going to try it out."

Contact staff writer Andrea Moss at (760) 739-6654 or amoss@nctimes.com. Staff writers Zach Fox, Gary Warth and Ruth Marvin Webster contributed to this story.

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