The Breakdown

Explaining Southern California's economy

Audit finds Los Angeles foreclosure registry 'never operated effectively'

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Los Angeles' four-year-old foreclosure registry program has been flawed and "never operated effectively," according to a sharply critical audit released Tuesday by city controller Ron Galperin. 

"My audit found that the program did not achieve, unfortunately, a good return on investment for the money, and the city has been ineffective in both tracking foreclosures and preventing and abating neighborhood blight," Galperin said at a press conference at City Hall Tuesday.

The registry was created in 2010 under then-mayor Antonio Villaraigosa with the aim of reducing blight in L.A. neighborhoods as a result of the foreclosure crisis. But by then it was too late, according to the audit. The worst of the foreclosure crisis had passed, and the registry never achieved its goals. 

From 2007 through 2013, more than 56,000 homes and apartments were foreclosed, according to the audit.

"The program failed to achieve its goal of preventing blight from taking root in our communities as a result of foreclosures," Galperin said in a letter addressed to mayor Eric Garcetti. Galperin highlighted three problems:

  • Though the Housing and Community Investment Department collected $5 million in registration fees from July 2010 through March 2014, no penalties for blighted, abandoned properties were collected during this period.
  • The program’s ordinance required lenders to register properties with the City too early in the foreclosure process -- upon the issuance of a Notice of Default  -- at which point the lender may not legally possess the property and may not even have legal access to it.
  • The registry was flawed, which resulted in incomplete registrations and fees going uncollected.

The audit recommends replacing the current foreclosure registry with a new tracking system that uses a geo-coded map instead of relying on reporting from banks. From Galperin's letter to the mayor:

  • Build a more accurate, self-populating geo-coded virtual map of all properties in all stages of the foreclosure process, including those that have been foreclosed upon and are a public nuisance.
  • Ensure responsible parties perform legally mandated maintenance.
  • Collect fees which can be used to fund a robust property inspection and enforcement program.
  • Provide detailed information to City departments and decision makers about distressed properties, responsible parties, complaints and inspections.

Councilman Gil Cedillo introduced a motion to address some of the recommendations and will try to collect fines retroactively.

“We must continue to hold banks accountable," Cedillo said Tuesday.  "There has been a $250 fine [per day, per property] associated with our foreclosure registry that has not been collected. We will ensure we collect those fines and we will look backwards to 2011 to collect fines from banks that were in clear violation of our ordinance.”

Correction: An earlier version of this story incorrectly stated Councilman Cedillo had requested the audit. The audit was initiated by the Controller's Office.

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