Mortgage

NYDFS hits PHH with six-figure fine for failing to maintain single zombie home

Investigation found PHH failed to maintain New Lebanon home for over 6 months

Back in 2016, the state of New York enacted “sweeping” new laws aimed at reforming the state’s foreclosure process and addressing the state’s issues with zombie homes.

Under the laws, lenders and mortgage servicers are required to report vacant and abandoned properties to the state, and are required to maintain properties they believe to be vacant and abandoned.

And if a lender or mortgage servicer doesn’t properly maintain the zombie home, as determined by the New York Department of Financial Services, the lender or servicer could face a fine of $500 per day per property.

On Thursday, the NYDFS showed that the threat of a fine for improperly maintaining a zombie home is not an empty one.

The NYDFS announced Thursday that it is imposing a six-figure fine on PHH Mortgage for failing to properly maintain a single zombie property.

Specifically, the NYDFS is hitting PHH with a $119,000 fine after an investigation found that PHH failed to maintain a property in New Lebanon for at least 238 days from the time the property was registered in the DFS registry as being vacant and abandoned. 

The fine was issued under the state’s “Vacant and Abandoned Property Law,” which requires lenders and mortgage servicers to fulfill certain maintenance obligations on zombie properties.

In a statement, NYDFS Superintendent Maria Vullo warned that this fine is likely to not be an isolated occurrence.

“The announcement of this enforcement action puts banks and mortgage servicers on notice that if they do not maintain vacant and abandoned properties, they will be held accountable by DFS,” Vullo said.

“It is also crucial that banks and mortgage servicers provide DFS correct and timely information and updates on vacant and abandoned properties to ensure full compliance with the law and correction of violations,” Vullo continued. “Anything less will be met with swift enforcement action.”

In a statement provided to HousingWire, PHH said that it has worked with its property preservation vendor to address the subject property.

“We are committed to adhering to all state laws and regulations on this matter and take our obligations to property preservation very seriously,” PHH said in a statement.

“In fact, PHH has spent over $19 million on property preservation and maintenance services over the past three years in the state of New York alone,” the company added. “With regard to the property in question, we have worked with our property preservation vendor, on whom we rely to track, secure and maintain vacant properties, to resolve this matter and the property is now up to code.”

In its announcement, the NYDFS reminded lenders and servicers of their duties to maintain properties under state law.

According to the NYDFS, it “continues to see errors” in how lenders and servicers are reporting applicable properties to the state’s zombie property registry, including listing incorrect properties, as well as a lack of updated information on previously registered properties.

NYDFS said that over the last year, it has worked with local government officials and lenders and servicers to resolve 497 complaints regarding vacant and abandoned properties.

[Update: This article is updated with a statement from PHH.]

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