Mortgage

New York doubling down in fight against zombie foreclosures

Attorney General announces new legislation to address “growing problem”

The State of New York doubling down in its efforts to fight back against the rising tide of zombie properties, which are homes that are vacant or abandoned during the foreclosure process.

New York Attorney General Eric Schneiderman announced on Monday that he plans to resubmit an expanded version of a bill he first introduced in 2014 to the state legislature. Schneiderman’s bill, called the Abandoned Property Neighborhood Relief Act, is designed to reduce the number of zombie homes by informing homeowners of their right to stay in their home until a court orders them to leave.

According to Schneiderman’s office, the bill will also require mortgage lenders and servicers to identify, secure and maintain vacant and abandoned properties shortly after they are abandoned. Under current state law, lenders and servicers aren’t required to secure and maintain vacant properties until the end of the foreclosure process.

The bill would also create a statewide registry of zombie properties, designed to help local governments with the enforcement of property maintenance laws.

Additionally, if Schneiderman’s bill becomes law, any fines levied against banks, lenders or servicers for violations of the state’s abandoned property laws would be directed into a fund, which would be used by local governments to hire additional code enforcement officers.

“Leaving zombie properties to rot is unfair to municipalities and unfair to neighbors, who pay their taxes and maintain their homes. In the next two weeks, my office will resubmit to the Legislature our bill that would require banks to take responsibility for maintaining properties much earlier in the foreclosure process, take that burden off of towns and cities, and allow local governments to more easily identify the mortgagees of these properties to make sure they maintain them,” Schneiderman said.

“And as my office enforces the requirement that banks take responsibility for these properties, any fines we levy will go into a fund to help towns and cities hire more code enforcement officers.”

Schneiderman cited the drastic increase of zombie properties in New York in 2014 as one of the main reasons for putting the legislature forward now.

According to Schneiderman, his office analyzed 2014 data and found that zombie foreclosures increased almost 50% in 2014 over 2013’s total. Schneiderman’s data showed that there were roughly 16,700 zombie foreclosures in New York last year.

Schneiderman’s figures echo a recent report from RealtyTrac. According to RealtyTrac’s Zombie Foreclosure Report for the first quarter of 2015, New York zombie foreclosures increased 54% from a year ago to 16,777, the third-highest state total and representing 19% of all residential properties in foreclosure.

Schneiderman’s bill requires lenders and mortgage servicers to periodically inspect properties with delinquent mortgages to determine if the property is occupied.

But the bill also makes it unlawful for a lender or servicer, or a person acting on their behalf, to enter a property that is not vacant or abandoned for the purpose of “intimidating, harassing or coercing a lawful occupant” in an attempt to get them to abandon the home.

Schneiderman said that the proliferation of zombie properties has significant impact on not just the homeowner in question, but also on the surrounding areas.

“With no one maintaining these derelict properties, they become vulnerable to crime, decay, vandalism and arson,” Schneiderman’s office said in a statement. “Furthermore, these zombie homes decrease the property value of neighboring homes and become an enormous burden for local code enforcement and emergency service providers.”

To that end, the bill would require lenders and servicers to register zombie properties with a statewide database called the Vacant and Abandoned Property Registry. Schneiderman said that the registry “will provide a much needed and readily available source of information on vacant and abandoned residential properties to local officials throughout the state, and will be supplemented by a toll-free hotline that community residents can use to report suspected vacant and abandoned properties to the Attorney General and receive information regarding the status of registered properties, including the identity of the mortgagee or agent responsible for maintaining them.”

According to Schneiderman’s office, the bill is expected to be sponsored by Independent Democratic Conference Leader and Senate Coalition Co-Leader Jeffrey Klein and Assembly Member Helene Weinstein.

And Schneiderman has support from a number of mayors from throughout the state. In the statement from Schneiderman’s office, the mayors of Buffalo, Syracuse, Binghamton, Niagara Falls, Newburgh, Albany, Jamestown, Nyack, and Valley Stream all expressed their support of Schneiderman’s bill.

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