Vacant Homes Posing New Threat to Cities

In western New York, the city of Buffalo filed a lawsuit on Feb. 21 against 36 lenders -- including big names like JPMorgan Chase and Countrywide Financial -- who were involved in 57 foreclosures that led to properties being abandoned and ultimately demolished by authorities.

The struggling Rust Belt city, plagued by about 10,000 vacant homes and commercial buildings, estimated the 57 foreclosures cost Buffalo $1 million in demolition work and another $1 million in nuisance costs -- from police patrols to boarding up buildings, to the social toll on communities.

"We have found homicide victims in these structures," Buffalo Mayor Byron Brown said in a telephone interview.

"Dog fighting has taken place in these structures. Drug dealing has been conducted. Last year one of our fire fighters was critically injured, losing one of his legs from the knee down, fighting a fire at a vacant structure," he said.

Alisa Lukasiewicz, who runs the city's law department, said Buffalo drew inspiration from similar lawsuits in Cleveland and Baltimore. "These properties are in a state of legal limbo," she said. "Banks walk away. The homeowners are gone, and the property is still there."

The city also launched "Bank Day" in a housing courtroom to consolidate cases against lenders into one afternoon each month. About 50 cases are pending, mostly against creditors accused of housing code violations -- from trash-strewn lawns to chipped paint and collapsing ceilings.

In some cases, mortgage companies threaten foreclosure if borrowers fall behind in loan payments but never go through with it, leaving the borrower technically the property's owner and complicating efforts to revive an abandoned home.

"Another big problem we have had is this new wave of lending," said Cindy Cooper, a Buffalo city prosecutor who specializes in housing. "It's difficult to work out who holds the note, who is in control of a property. These mortgages have been packaged into portfolios and sold on Wall Street."

CONTINUED: For Sale: A Home for a Buck

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