"Successful" foreclosure has a big downside for the banks.Foreclosure has the potential to make banks the proud owners of blighted or flawed properties no one wants.
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x5355321You can buy a house and get a mortgage without a home inspection. Banks have traditionally not made a "quality" assessment of the properties of the mortgages they hold, relying solely on appraisal, which emphasizes market value with a cursory nod to condition. The only entity to attempt to make a quality conditions assessment have been the HUD appraisers, who will note maintenance and code issues in their appraisal reports.
My point is, that upon successfully completing a foreclosure, a bank may find itself in possession of a property that almost no one would want. The house in the link above is just one example. That house had more value before the aborted foreclosure was initiated. The bank did harm to the city, the homeowner, the renter and itself by instituting a foreclosure that it did not carry through with.
If Banks take foreclosure actions as far as right to the actual auction stage, I think they should be compelled to go all the way and be required to bid and take it back as an REO property. If this rule were put into effect, it might cause banks to be more willing to successfully negotiate with the current owner to keep a potentially blighted or soon to be blighted property off their hands.
I have heard of cases where a bank came into possession of a blighted property and then did not pay municipal taxes ON PURPOSE so as to force the city or town to take possession - pass the hot potato as it were.