Michigan bill would exempt banks from paying fines for 'blighted' properties

A Michigan state senator says cities such as Detroit need laws to control the spread of urban blight in the form of abandoned homes and properties. State Senator Virgil Smith (D) has proposed a bill in the Michigan legislature to hold landowners accountable for either razing or repairing damaged properties. In financially-strapped Detroit, police and fire services have been curtailed while abandoned properities quickly become targeted by looters. One national report found that almost 25 percent of all Detroit properties were blighted in 2011.

 
Some reports suggest that abandoned homes are stripped of copper wiring and pipes within a week of being abandoned, for example, because of mortgage or tax foreclosure. Such damaged properties soon become uninhabitable and become part of the growing inventory owned by the City of Detroit, as well as banks. This also holds true in Flint, another city in Michigan plagued by outmigration and blight that followed the closing of General Motors factories.
 
According to the Detroit Free Press, "At closing, if you're trying to sell the piece of property, just like a water bill or property tax bill, that blight bill will also be there that you have to make whole," Smith said. The bill introduced by Smith, SB 35 was introduced in January 2013 and provides for fines, garnished wages and property liens for homeowners violating the law. Approximately one half of the properties in Detroit designated as blighted are owned by banks. Banks such as Fannie Mae (a federally chartered institution) may be exempted from some of the provisions of the law. Speaking to the Free Press, Smith explained, "I'm in a Republican-dominated world, so they're amenable to big business, so to speak. Sometimes you have to make concessions and compromise," in an apparent allusion to Michigan’s Republican –dominated legislature. 
 
Page eleven of the bill provides:
 
 (21) THE SANCTIONS SET FORTH IN SUBSECTION (20) DO NOT APPLY 
16 TO A BANK, LENDING INSTITUTION, CREDIT UNION, CREDIT UNION SERVICE 
17 ORGANIZATION, OR GOVERNMENT ENTERPRISE THAT HAS BECOME THE OWNER OF 
18 A PROPERTY AFTER FORECLOSURE OR AFTER TAKING A DEED IN LIEU OF 
19 FORECLOSURE, PROVIDED THAT THE ENTITY COMPLIES WITH THE PROPERTY 
20 PRESERVATION GUIDELINES ESTABLISHED BY FANNIE MAE, FREDDIE MAC, THE 
21 UNITED STATES DEPARTMENT OF VETERANS AFFAIRS, THE UNITED STATES 
22 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, OR THE UNITED STATES 
23 DEPARTMENT OF AGRICULTURE. 
 
By the end of March, the Democrat legislator says he expects Wells-Fargo – a large mortgage holder – to enter into talks with the city of Detroit about its many blighted properties. Other mortgage holders include Deutsche Bank, Fannie Mae, Freddie Mac and the Veterans Administration. All of these would see some exemptions from the law introduced by Smith. Previous legislation introduced by Smith to reduce blight had been criticized by financial institutions.
 
Detroit currently has a city manager named by Governor Rick Snyder. Burdened by corruption scandals, fractious politics, outmigration, and $14 billion in long-term debt, Detroit is expected to run out of cash to operate facilities and services within months.

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