Ending foreclosure profiteering
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push high-foreclosure neighborhoods into downward spirals. Residents have no idea where to turn for help.

Mortgage servicers must now step up and exercise responsibility to communities. The eight biggest servicers are divisions of financial institutions — Bank of America, Chase, Wells Fargo, Citigroup, GMAC, PNC, SunTrust, and U.S. Bancorp — that have received billions in federal bailout funds. Institutions receiving federal support should be required to dispose of foreclosed homes in a way that stabilizes battered neighborhoods.

One model is the nonprofit National Community Stabilization Trust, which works with servicers to offer vacant homes for sale to nonprofit organizations and other developers with track records in neighborhood revitalization. That voluntary effort should become mandatory for servicers benefiting from federal aid.

Local courts also have a role to play.

Judges can follow the model set in Cleveland, where Hon. Ray Pianka ordered Wells Fargo to bring foreclosed houses into compliance with housing codes before selling them.

Mortgage servicers are in an unenviable position, stuck with the expensive mess bankers left behind. But the fate of fragile communities is in their hands. Government at the federal and local level must now require them to help neighborhoods recover from the foreclosure catastrophe.

Katz is the author of Our Lot: How Real Estate Came to Own Us and a reporter for the Nation Institute Investigative Fund.