Check out this story in The Wall Street Journal today about the efforts many California cities are making to force banks to care for foreclosed houses.

The story leads with a look at Indio’s program, which makes neglecting foreclosures — evidenced by algae in the pool, broken windows and dead landscaping — a matter of fines and criminal charges.

Who’s threatened with the charges? Banks.

But last year, Indio passed a law that allowed it to charge banks with a criminal misdemeanor if they allowed a home to fall into disrepair.

“If I need to do it, I’ll say, ‘Mr. Bank President, if you don’t come and take care of your property, we’re going to come arrest you and take you to court in California,’” says Brad Ramos, Indio’s long-serving police chief.

The Indio program ups the criminal ante of a precedent-setting program in Chula Vista. From the WSJ:

Indio’s neighbors Palm Springs, Desert Hot Springs and Cathedral City each pushed ahead with laws much like Indio’s. The town’s own ordinance was fashioned off a 2007 law from Chula Vista, a city south of San Diego which began fining lenders up to $1,000 a day for unsightly or dangerous code violations such as broken windows.

“These lenders speak one language — money,” says Doug Leeper, the Chula Vista code-enforcement manager, who says he has issued around $1.4 million in fines against lenders. So far, he’s collected half the fines and has plans to wrangle the rest through tax liens when the homes are eventually resold.

Indio’s gruff Mr. Ramos, however, is pushing it beyond tax liens, equating the matter to “arresting the guy that robs a bank.” Any softer approach would put the city’s home prices in further free fall, he says.

Chula Vista recently announced the abandoned property program is in the top 50 contenders for a government innovation award from Harvard Kennedy School, the winners of which will be announced in September.

The city said Leeper, who created the program, has been contacted by more than 350 cities that want to adopt similar legislation to deal with foreclosed properties.


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