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Banks in Ohio turning to demolishing foreclosed homes

A new trend is emerging after foreclosures, and the trend seems to have some roots in Ohio. A 2009 Ohio law created land banks. Parcels of land are sold through the land banks to institutions like churches or hospitals seeking to expand, or in some case the land is used as such things as parks. A number of banks, including banks in Cleveland, have found the costs associated with maintaining properties after an Ohio foreclosure have run so high that it is cheaper to bulldoze the foreclosed home and give the property to the land bank.

The 2009 Ohio law created the Cuyahoga County Land Reutilization Corp. The idea was to allow the land banks to acquire unwanted properties and use the land for better use. A number of states reportedly have followed the Ohio model and have created similar laws to deal with the foreclosure crisis.

Bank of America and Wells Fargo reportedly announced plans to donate more than 100 properties to land banks. The banks apparently have grown tired of footing the bill for maintenance, upkeep and taxes on the foreclosed properties and are willing to foot the bill, which can be as much as $7,500, to demolish the properties and turn them over to the land bank.

The Washington Post recently ran a story on the land bank idea. The article says that land banks have actually been around for decades. The Post interviewed a professor from Emory University who says the Cuyahoga land bank is one of the most productive in the country.

The foreclosure crisis has put many Ohio homeowners underwater on their mortgage, like in markets all across the country. One of the ideas of demolishing the unwanted homes appears to be to reduce the number of properties on the market to help boost prices.

Still, foreclosures continue. Some homeowners choose to file bankruptcy to avoid a deficiency judgment or continued liability on a second mortgage on a home that is underwater. Other people filing for bankruptcy see the federal law as a viable option to retain the home through debt relief or reorganization. Cincinnati residents who are under financial distress should consider speaking with an experienced bankruptcy attorney to learn what options may be available in a tough economy.

Source: Washington Post, "Banks turn to demolition of foreclosed properties to ease housing-market pressures," Brady Dennis, Oct. 12, 2011

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