Banks find solution to many foreclosures

Foreclosures continue to plague many local housing markets, such as San Mateo County's County in the San Francisco Bay Area, which has had home prices stifled due to a giant backlog of bank-owned foreclosed properties. A recent report found that local banks in the county are not disposing of distressed properties nearly as quickly as they are acquiring, increasing the shadow inventory each month.

The report that was assembled in part by county Supervisor Rose Gibson and her staff showed, as of July 20, local banks owned more than 10,000 distressed homes dating back to 2007, the San Francisco Examiner reported. The average delay between when a homeowner receives a notice of default and when the bank resells the property has increased to 600 days up from 325 days reported in late 2008.

One way banks are working to decrease the shadow inventory of foreclosed properties that are diminishing home values all over the country is by tearing down vacant buildings. The Washington Post reported that banks are paying construction companies to demolish properties that are abandoned or at risk of not selling. With each property a bank takes ownership of in a foreclosure, they also inherit upkeep expenses, taxes, code violations fees and the price of marketing the properties for sale. Many lenders have found it is cheaper to simply knock down the decaying homes rather than fund their maintenance.

For many communities, the demolitions have led to improvements in the neighborhood including community gardens, church additions and much-needed parking lots. Though some areas feel destroying homes could hurt struggling cities, banks argue that the homes being knocked down are unsalvageable and would only hurt the market, the news source reported.

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