SUNDAY EDITION | Few results in new Metro foreclosure efforts - WDRB 41 Louisville News

SUNDAY EDITION | Few results in new Metro foreclosure efforts

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863 S. 24th Street 863 S. 24th Street

LOUISVILLE, Ky. (WDRB) -- After years of neglect, city officials had enough with the empty, trash-filled lot at 863 S. 24th Street in Louisville's California neighborhood.

The house on the property was in such bad shape that taxpayers funded its demolition in 2010, leaving a vacant lot that the owner still failed to maintain. So, in an attempt to finally force the property into different hands, the city filed foreclosure on the lot in September 2012.

Metro government plans up to 800 foreclosures on neglected properties as part of a new strategy by Mayor Greg Fischer, who has put a major emphasis on reducing blight.

Yet, a year and a half later, nothing has changed for the empty lot on S. 24th Street. It's still overrun with trash and tires – a haven for rats and raccoons in the summer, according to next-door neighbor Eric Shirley.

"They absolutely ‘ain't doing nothing with it," he said in an interview Wednesday. "It's been sitting there."

A review of the court record shows the Jefferson County Attorney's office, which is handling the foreclosures for Metro and state government, has made no attempt to advance the case since filing the initial complaint in the fall of 2012. In fact, nothing at all has been filed in the case since May 2013.

The case helps explain why the city's new foreclosure strategy – which Fischer announced in mid-2012 – has yielded few results so far. Of the 112 foreclosures Metro government has filed, only five properties have made it a court auction, where they were either sold to a third-party bidder or legally assumed by the city and placed into an inventory of properties ready for redevelopment.

While foreclosures typically take nine months and often last longer, a review of Jefferson Circuit Court records by WDRB.com shows that many of the cases are stalled simply because the party that filed the action – Metro government, often jointly with state government – hasn't pushed the case along.

In 41 cases, nothing has been filed in the court record since June 2013 or earlier.  Another 31 have had no action since the end of the year or earlier. The court has even warned that two of the cases could be dismissed for lack of prosecution.

The inaction means the empty lot on S. 24th Street remains in the name of absentee owner Reginald Green – though Green has made no attempt to defend his claim to the property in court.

The next step is for the County Attorney's office to ask a judge to order that the lot be sold at a court auction, where Metro government might take title and place it in the city land bank, or a third party could buy it from the court.

Bill Schreck, the coordinator of Metro government's vacant properties initiative, said he was "not fully aware" that many of foreclosures aren't being pushed through the court system.

"I know we got commitment from the County Attorney to support this process," Schreck said in an interview Wednesday.

Bill Patteson, spokesman for County Attorney Mike O'Connell, said all of the cases are under control and being handled – even the two which the court has threatened to dismiss if nothing is filed soon.

"It can be a complex and time-intensive process, but we are working with all of them and moving all of them along now," he said.

In addition to ordinary court snags, like notifying all individuals who might have an interest in the property, Patteson said new attorneys have had to get up to speed on the cases after the retirement last fall of assistant County Attorney John Schardein, who for years handled the office's real estate cases.

The larger effort against blight

The city-led foreclosures are only one piece of a larger strategy to reduce blighted properties, most of which are concentrated in West Louisville.

Metro government has stepped up demolitions of crumbling homes; increased the number of properties it cleans up and boards; and tripled the amount of money it collects from negligent property owners to reimburse the city for cutting grass and other maintenance, said Schreck.

The city has also consolidated various positions into a single team in one department to deal with the problem, and Fischer created a part-time job (Schreck's) in the Mayor's office to oversee it all.

"This mayor really has this way up on his radar screen, and he is wanting to do whatever he can do," Schreck said. "He is not satisfied, and we are not satisfied, with our accomplishments to date. We want to do more."

Until Fischer's administration, it had been years since city government foreclosed on a blighted property, even as the 2007-2008 mortgage meltdown caused many homeowners to walk away. Foreclosure is a costly and timely process with unpredictable results.

Of the five properties Metro government has sent all the way through, two were purchased by individuals at the court sale. The other three are being transferred to the city land bank after no private party bid for them, said Mary McGuire, a Metro government official who helps decide which properties the city targets.

INTERACTIVE MAP - FORECLOSURES FILED BY METRO

These crumbling homes and empty lots typically have thousands -- or tens of thousands of dollars -- in liens from unpaid taxes and city fines, meaning they are highly unlikely to sell on the private market. That's why a court sale – which cleanses the title – is the only practical way to get them to a new owner.

The effort started in 2012 when Fischer appropriated $125,000 in city money to fund about 100 cases. The mayor raised the goal to 800 cases after receiving an additional $750,000 from Kentucky's share of a nationwide settlement with big mortgage banks over homeowner abuses.

At a press conference in front of a boarded up house in July 2012, Fischer said the foreclosures were among several new efforts that would "have a real impact on citizens who are living everyday with the problems that vacant and abandoned properties create."

Shirley, who lives in the duplex next door to the empty lot at 863 S. 24th Street, is one of those citizens.

He said there was so much debris in the empty lot that he paid someone $50 a few days ago to sweep it into piles and to remove some of the tires. He had no idea the lot had become the target of a city foreclosure.

Updated March 25, 2014: Despite the lack of progress in getting the lot to a court auction, Schreck said Metro government did clean and cut it in July and again in November 2013. An inspector visited it on Feb. 27, 2014, he said.

"We do not just forget about these properties; we still apply the property maintenance codes as well as others to try to get the owners...to do what they should," he said.

Though only 112 foreclosures have been filed, according to a city list, officials say they're still planning to bring up to 800 cases.

"Everybody is wanting to ramp that up, obviously, to get the numbers up," McGuire said.

Attica Scott, chairwoman of the Metro Council's ad hoc committee on vacant properties, said her group is aware of the city's foreclosure efforts, but, "we have not followed the pace."

"I just have to wonder how aggressive we are being in foreclosing on these properties," she said.

Not an ideal tool

Even if the cases were proceeding at a fast clip, Kentucky's property laws still make foreclosure a less-than-ideal tool for the city to use in the fight against vacant and abandoned properties. Officials say the whole effort is experimental, and Metro government is advocating for changes in state law that would give the city more flexibility.

"This is sort of a learning curve," McGuire said.

For example, Habitat for Humanity of Metro Louisville has long been interested in demolishing the run-down house at 1837 Bank Street in Portland and building a new one.

Yet, when the house came up for auction a few months ago after Metro foreclosed on it, Habitat did not try to purchase it.

The reason is that state law requires any bidder to pay at least two-thirds of the property's appraised value – in this case, $5,335 – or else the original owner has up to a year to reclaim the title. That means any money put into the property during that first year could be for naught if the original owner resurfaces.

For the non-profit Habitat, $5,335 was too much for a home that it would then have to demolish before building a new home, executive director Rob Locke said.

So, the government ended up with title to 1837 Bank Street, and it's now being placed in the city's land bank, McGuire said.

Habitat is still interested, Locke said, but it would have to negotiate with the land bank as to the terms of a transfer, such as whether Habitat or city taxpayers will foot the bill for demolishing the house.

As the 2014 session of the General Assembly wraps up, Metro government is pushing three bills that would give the city more flexibility with these issues:

  • HB 490 would give a foreclosed landowner only six months – not a full year – to reclaim the property after a court auction. A nonprofit like Habitat could bid a very low price for a lot at a court auction and then wait only six months before starting work on it.
  • HB 541, which passed the House on Friday, would strengthen the city's hand when using eminent domain instead of foreclosure to take legal control of blighted properties – a process called "spot condemnation." The property's fair market value would be reduced by the government liens attached to it and by the estimated cost to bring it up to code. That means the city could condemn an eyesore like 1837 Bank Street and take title to it for nothing, since the liens attached to it (more than $18,000) far exceeded its appraised value ($8,000).
  • And HB 403, which passed the House on Monday, would expand the powers of the land bank, an entity controlled by Metro government, the state and the Jefferson County school board. If the land bank succeeds in its mission – passing unwanted properties to new owners for redevelopment – it would get a portion of the tax revenue the improved properties generate for five years. That would provide a stream of revenue to fund the land bank's operations, Schreck said.

"None of these things are absolute solutions in themselves," he said. "It's a complicated, very expensive problem."

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