Guest blog by Amber R. Van Til, IBA Senior Vice President-Government Relations
USA Today published an article last June, titled: “Cities with the most abandoned homes.” The article ranked the 10 cities nationwide with the highest rates of abandoned homes that are in foreclosure. The No. 1 ranking was in the Indianapolis/Carmel area of Indiana. For those of us in the banking community, this finding comes as no surprise. The article states that one out of every three homes in foreclosure in the Indianapolis/Carmel area is abandoned, compared to the national average of one in five. The author of the article, Mike Sauter, correctly reasons that abandonment is so high in Indiana, because the foreclosure process in Indiana is too long. The average length of foreclosure nationally is 477 days, but in Indiana the average length of foreclosure is 607 days. In many cases the homeowner simply gives up, due to the lengthy process, and abandons the home. This abandonment inevitably leads to distressed properties, which invite crime and can significantly devalue neighborhoods.
It is important to understand how we got into this predicament. Indiana has been dealing with a foreclosure problem for nearly 20 years, largely attributable to the continual loss of manufacturing jobs in the state over the last two decades. It was when the bubble burst, in late 2007, that many members of the Indiana Generally Assembly began to take note. Since then, dozens of bills have been filed to fix Indiana’s “new” foreclosure problem. The problem is that many of these bills were addressing a problem that was in the process of righting itself. Indiana housing was faring comparatively well throughout the economic crisis; we had already dealt with a relatively high number foreclosures for the past 10 to 15 years, and we were well prepared to weather the storm. In fact, during the crisis, Indiana’s foreclosure rate remained generally steady. Nationally our foreclosure ranking moved from second to 15th, while maintaining the same foreclosure rate. Whereas California, Nevada and Florida saw deflation pricing bubbles of 50 percent, Indiana’s rate hovered around 7 percent.
During this time, the banking industry was taking a heavy hit by the media, and public sentiment was plummeting. It became difficult for the banking advocacy to reject legislation that gave homeowners more time and seemingly more options with regard to keeping their homes. And certainly the banking industry wants consumers to retain their homes. On average a bank loses 40 percent of its investment when a property is foreclosed. Everybody wins when homeowners remain in their homes but, unfortunately, many of the bills passed served only to lengthen the foreclosure process, which directly attributed to our current abandoned housing problem.
The conversation at the Statehouse has changed dramatically in recent years. Legislators have been seeking ways to address the abandoned housing problem and to shorten the foreclosure process. There is a new awareness that Indiana made this mess, and now it is time to clean it up. The banking lobby is encouraged by this movement and is working closely with interested parties to support and pass meaningful foreclosure reform. We applaud the members of the General Assembly for recognizing the need for reform, and we thank them in advance for the time and effort they will be dedicating to the cause.
Amber R. Van Til, 01/08/14