More Foreclosure Headaches

As home foreclosures continue to rise, a growing number of local governments are imposing stiff fees on mortgage companies responsible for the vacant properties. Local governments contend that vacant homes are burdening them with added maintenance costs involving cleanup and policing.

Officials say the levies are intended to offset the cost of maintaining and policing abandoned homes and to keep these properties from becoming blights on neighborhoods. But the tougher rules are adding to the financial burden on mortgage companies grappling with a surge in foreclosures, which some economists estimate may reach three million by the end of 2008.

City officials complain that local taxpayers can't continue to pick up the cost of cutting lawns, draining swimming pools, boarding up windows and policing vacant properties. In October alone, Louisville, Ky., spent $106,000 maintaining properties owned by major lenders.

Locally, the city of Minneapolis assesses a $6,000 a year fee for abandoned and boarded up homes. This does not include the cost of boarding up a home, which is sometimes done by the city, especially after fires or repeated burglaries.

The fee seems unusually high considering that many properties on the north side of Minneapolis will sell for as little as $25,000. In the end, it may prove to be less expensive for lenders to bulldoze homes, rather than continue to pay out fees to cities and property managers. Only time will tell if this proves true. Source City of Minneapolis and WSJ.com.