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Spokane, Washington  Est. May 19, 1883

Spokane seeks help from the Washington Legislature to fight foreclosed ‘zombie properties’

On Monday morning, one of Spokane’s several hundred zombie properties caught fire.

The one-story home on West Cleveland Avenue should have been empty. It was in foreclosure for nearly two years after the mortgage-holder died, and a court ordered its sale last October to pay its creditor.

But that didn’t keep the squatters out, and when those occupants tried to refill a kerosene stove, a fire ignited. One person was burned so severely he was transported to Providence Sacred Heart Medical Center, then flown to Harborview in Seattle.

Spokane has an estimated 500 abandoned homes in some stage of foreclosure, which city officials call zombie properties. The grass and shrubs in their lawns grow with the spring rains then die in the summer, creating fire hazards. Their yards become dumping grounds for unwanted trash. Their exterior walls become canvases for graffiti artists. Their interiors are torn up, sometimes to strip out wire for recyclable metal, sometimes just for vandalism.

They become magnets for drug use and other illegal activity.

Spokane city officials have stepped up efforts to monitor these zombie properties, and are asking for state help in that fight. On Tuesday, a bill before a House committee offered a way to do that by creating a partnership among lenders, homeowner advocates, and state and city officials.

“We’re trying to figure out what to do with abandoned properties,” said Rep. Tina Orwall, the bill’s sponsor. “We’re trying to get more abandoned properties cleaned up.”

This is a map of properties in some stage of foreclosure in Spokane, based on data from City of Spokane GIS Services

Tracking the zombie properties

While these zombie properties are quickly known to neighbors who see their property values going down as problems pile up, city officials didn’t have a good way to keep track of them until last year when the Spokane City Council passed an ordinance to set up a registry for abandoned properties.

A list of properties in some stage of foreclosure or financial distress was compiled by a private company under contract to the city, and research is being done to see who is responsible for the properties. A map made from the list as it existed in October shows that while almost no neighborhood has escaped the effects of the burst housing bubble, the problem is not spread evenly around Spokane.

When grouped into sectors of about a square mile, they tend to concentrate in several areas. The West Central neighborhood north of Broadway has the most clusters for northwest Spokane, and the blocks near Freya between 29th and 37th avenues have the most in south Spokane. But by far the higher concentrations are in northeast Spokane between Division and Market, from Wellesley to Indiana.

“We would like to be able to hold lenders accountable to maintain their properties,” said City Councilwoman Amber Waldref, who represents northeast Spokane’s Council District 1.

But those efforts run up against a 2016 state Supreme Court ruling, Jordan vs. Nationstar, that limits a lender’s ability to enter a property before a foreclosure is final. Some borrowers had sued after “loan servicers” hired by the mortgage holders had entered homes in foreclosure while they were still occupied, changed locks or removed personal property.

To work through changes in foreclosure laws, the state has assembled representatives of the banking industry, consumer protection advocates, and various state agencies like the Department of Commerce and the Housing Finance Commission that were given some responsibility under the 2011 Foreclosure Fairness Program. Spokane city officials joined those discussions in an effort to work out authority to compile Spokane’s list of abandoned properties and hold the mortgage holders responsible for maintaining them before they become a neighborhood blight.

One wrinkle, Waldref said, is that state law does not define an abandoned property, although it does define blighted.

Earlier intervention the goal

The city’s contractor created a registry by scouring court documents and other public records to identify properties in foreclosure, then searched records to find the legal owner. The company also visited each one to see if any action was needed.

But even if it can contact the owner, the city’s options to address problems with zombie properties is limited, said Melissa Wittstruck, a neighborhood and housing specialist with the city’s Code Enforcement Department. If the structure deteriorates enough, it could be deemed substandard and possibly even ordered torn down.

That’s a loss for the owner, the neighborhood and the city, which would see the taxable value of the property decline. It’s better, city officials said, if the owner maintains the property while it’s in foreclosure.

To do that, they need the Legislature to change the law and address the 2016 Nationstar ruling. Orwall’s bill, although still subject to change, received cautious support in Tuesday’s hearing from all sides in the ongoing discussions between lenders and borrowers over how to handle distressed properties.

Along with providing a legal definition for an abandoned property, it would allow a loan servicer to enter a property before the foreclosure is final with the occupant’s permission and to make an external inspection under certain conditions even without that permission. It would create a process for a certificate of abandonment, and 30 days after that would be issued and notice given, the property could be entered by loan servicer. It also allows for earlier entry in cases of “imminent danger.”

Denny Eliason, a lobbyist for the banking industry, said the bill contains “important fixes” to clear up the uncertainty around the Northstar case.

Clay Gatens, an attorney who represented homeowners in that case, said the state needs to license people servicing the loans and keep some oversight of the process because national mortgage companies often contract with regional companies, which subcontract with local entities that may not be licensed.

First responders need to know if a property is abandoned

Orwall said Spokane city officials are leading the way on trying to get a handle on abandoned properties. Seattle has such a housing shortage it doesn’t really have a problem with homes sitting empty for long periods, but other Puget Sound communities, including Burien, SeaTac and Kent in her district, do. The hearing on the bill brought support also from representatives of Spokane Valley and Tacoma.

“They’re at the table,” Orwall said of Spokane officials. “It’s complicated, but Spokane is ahead on being able to know the status of their properties.”

Right now, the registry is used primarily for monthly checks of abandoned properties, another task assigned to the private contractor the city hired. But eventually the city expects to tie that information to computer systems that police and fire use when called to a property.

Spokane Acting Fire Chief Brian Schaeffer hopes for a time in the near future when firefighters responding to a call will know as they pull up to a property whether it’s abandoned.

“You only have a couple of seconds to make a go or no-go decision,” he said.

Like Monday’s fire on West Cleveland, experience has taught firefighters that just because a property is abandoned doesn’t mean it’s unoccupied. Schaeffer recalls one abandoned building that caught fire twice, the second time after it had been boarded up and padlocked. When firefighters arrived in front, “10 to 15 squatters went out the back,” he said.

They’d always check for occupants, Schaeffer said. But if it came to a question of risking lives to save an abandoned, blighted building, firefighters might just take a defensive position and prevent the fire from spreading to nearby structures.