Housing Court Judge Nowak's innovation in holding lending institutions responsible for vacant foreclosed housing causing blight is catching on nationally, especially in cities having epidemics of sub-prime mortgage foreclosures.

http://www.buffalolawjournal.com/art...IDNO=110200829

Buffalo’s fight against blight making national headlines

BY JODI SOKOLOWSKI, BuffaloLaw Journal

A BusinessWeek cover story has put Buffalo on the map as a poster child for the national mortgage “meltdown.”

In “Dirty Deeds: What Happens When Even the Banks Walk Away From Foreclosures,” from the magazine’s Jan. 3 issue, senior writer Michael Orey focuses on the efforts of Buffalo Housing Court Judge Hon. Henry Nowak and city prosecutor Cindy Cooper to bring all parties to the table when a home is abandoned and left to rot.

“If there ever is a national response to the messy legacy left by foreclosures, it might include something like the Buffalo system, which seeks to take action before the presence of abandoned houses hurts entire neighborhoods,” Orey wrote.

While Nowak’s regular “Bank Day” started, in Orey’s words, as a “venue where landlords and tenants duke it out over evictions and back rent,” it works backwards to find out who the title holders and lenders are to resolve housing violations.

The housing court is “asking (bank) lawyers to fix problems like peeling paint, broken masonry, and overgrown or trash-filled yards at houses the city says the banks are responsible for maintaining,” the article continued.

Local sources say Buffalo’s housing woes have originated largely from suburban sprawl as well as a shrinking, aging population, but they agree that increasing numbers of foreclosures, many stemming from predatory lending and sub-prime rates, have forced the city to face its housing issues head-on.

The story behind the story

After writing an earlier story about foreclosures in Cleveland, Orey talked to one of that city’s housing attorneys, Kermit Lind, who told him about Cooper’s doctoral dissertation in sociology. Cooper’s paper, about the role of banks in “residential abandonment,” was submitted in December 2006 at the University at Buffalo, where she also obtained a law degree.

“Buffalo seemed like a good venue to tell this tale,” Orey said in a phone interview. “And as much as it was about Buffalo and cities like it in the Rust Belt, my sense was that cities in the rest of the country will be going through this in the years to come — not necessarily the same way, but (facing) similar issues.”

A step further

Nowak notes in the BusinessWeek article that foreclosure proceedings often stop abruptly when a lender realizes that a loan exceeds the property’s value. That can leave a property in limbo and open to vandalism, theft and decay.

Western New York Law Center attorney Kathleen Lynch, who was interviewed for the BusinessWeek article but not quoted directly, says lenders shouldn’t simply be let off the hook when that happens.

“The key is, if banks are going to start a foreclosure proceeding, they should do their own due diligence to understand the value of that asset and make a determination if they’re going to go through the deed process,” she said.

Nowak told the Buffalo Law Journal that he would like to see legislation requiring banks to notify borrowers of the foreclosure process because there aren’t “adequate protections in place to notify homeowners of their rights.” Many homeowners believe a bank has already foreclosed on their house long before the title has transferred hands, for example, or assume that they must leave their property before they receive an eviction notice, he explained.

Keeping homeowners in a house until foreclosure is final is the banks’ best option for maintaining the property’s value, Nowak believes, other than hiring a management company or filling the property with renters.

“We’re not saying, ‘Give everyone a break,’ but (lenders are) giving up the greatest security system (they) ever had,” he said.

“Everyone is working together to get a model,” Cooper said in an interview. “Not just the courts, but the collaboration (with community groups) that we’ve had.”

While Buffalo’s Housing Court continues to combat blight and the City of Buffalo’s Anti-Flipping Task Force works on a foreclosure study that is expected to be completed in September, the area’s housing crisis won’t ease without funding.

Rep. Brian Higgins, D-Buffalo, has introduced the Neighborhood Reclamation and Revitalization Program Act, HR-3498, to support demolitions in eligible communities while also studying new development.

“That would go a long way,” said Lynch, who believes the legislation would give cities greater flexibility as they tackle blight.

Regardless of what happens next in the mortgage crisis — experts say it’s too soon to tell — Orey’s article is bringing to light the many layers that cities must unravel when confronting housing issues.

“I think the word needs to get out there,” Cooper said. “I’m not saying what has happened here will happen elsewhere, but I think lessons here can be taken and applied elsewhere.”

Nowak said awareness of housing and lending issues is growing.

“The problem always existed, but we didn’t have the platform to talk about it until the national crisis,” he said.

NOTE:
Last week’s issue of BusinessWeek features a cover story on efforts in Buffalo and other cities to combat the ill effects of widespread mortgage defaults.

JIM COURTNEY/BUSINESS FIRST