New York Times: A New Effort in Albany to Put Lenders in Charge of Abandoned Properties
On February 9, The New York Times published an article titled A New Effort in Albany to Put Lenders in Charge of Abandoned Properties.
A New Effort in Albany to Put Lenders in Charge of Abandoned Properties
NEWBURGH, N.Y. — The blackened, nail-filled floorboards snap under the feet of the fire chief, Michael Vatter, as he enters the burned-out home at 322 Washington Street. The blaze that destroyed this house, which faces a popular playground, occurred months ago, but nothing has been done to tear the structure down.
The property is one of thousands of so-called zombie homes scattered throughout financially hard-hit areas of New York State, houses that have been abandoned by their owners before banks have finished foreclosing on them. In many cases, according to upstate politicians and fire officials, these homes have little value, and banks will take years to finish the paperwork. In the meantime, such properties fall apart, or burn down.
“If the banks don’t want the property we are screwed,” Mr. Vatter said. He said local homeless people call the bank-owned zombie houses abandominiums. Wells Fargo owns the Washington Street property; before the fire, it was a “drug-shooting gallery and flophouse” for local prostitutes, Mr. Vatter said.
On Monday, Eric T. Schneiderman, New York’s attorney general, is expected to outline legislation that he hopes will force banks to take responsibility for zombie properties, providing some help to cities like Newburgh, where officials estimate 10 percent of all homes are in some stage of abandonment.
New York State has roughly 15,000 zombie homes and leads the nation in the time required to foreclose on a home, at almost three years, according to data from RealtyTrac, a company that tracks troubled properties.
The bill Mr. Schneiderman will be asking Albany lawmakers to embrace will make lenders responsible for homes soon after they are abandoned, requiring banks to register the properties in a central database and pay for their upkeep, according to government staff members briefed on the legislation but not authorized to speak on the record.
This will not be easy, in part because banks, homeowners and city officials often disagree on what constitutes abandonment. As a result, the attorney general plans to define the term, these people say. The legislation will propose that a house can be deemed abandoned if a bank has not received a mortgage payment after an as-yet-undetermined number of weeks; other conditions, like broken windows, could also be considered.
“If a property is vacant and deteriorating, a bank has a duty to maintain it and move swiftly to resolve the foreclosure case,” Mr. Schneiderman is expected to say Monday, when he plans to detail the legislation during a speech to the New York State Conference of Mayors and Municipal Officials. His remarks were reviewed in advance by The New York Times.
If the bill passes, banks that fail to register an abandoned house will be subject to a fine, possibly $1,000 a day for each property that is not in compliance. Mr. Schneiderman’s bill also will propose that banks be forced to notify homeowners of their right to remain in a property until a judge has formally signed off on the foreclosure.
Mr. Schneiderman is also expected to propose a separate bill that would double the number of land banks in New York State to 20, from 10. Land banks are state-funded nonprofit organizations that pay to rehabilitate vacant properties.
As for 322 Washington Street, Tom Goyda, a spokesman for Wells Fargo, said that the house had become vacant in May 2012, and the bank immediately took steps to secure it. “Unfortunately, our ongoing efforts to keep the property secure and to address maintenance issues were undermined by the repeated activities of squatters and vandals at the location,” he said.
The bank took full possession of the house in August 2013, just before the fire, he said. “We are working through the insurance claims related to the fire in September before we can determine how to proceed with the property.”
For towns like Newburgh, Mr. Schneiderman’s bill would be a start.
Newburgh, with a population of roughly 30,000 people, sits on the shore of the Hudson River, about 60 miles north of New York City. Like many upstate communities, Newburgh was hit hard when big companies left the region. In addition to zombie houses, it is also battling high crime and unemployment rates.
Judith L. Kennedy, Newburgh’s mayor, said that unless the banks take responsibility for abandoned homes, Newburgh’s problems will only worsen. “Cities like Newburgh have been left holding the bag, and we can least afford it,” she said, standing outside an empty, burned-down shell on Maple Street, not far from Washington Avenue.
A local resident, who lives next to the abandoned property on Maple Street but would not provide his name, said the property had been vacant for roughly three years. He said his windows had been cracked by falling debris; the last item to hit his house was a nest full of dead birds. “When it’s windy, the soot blows into my house,” he said, adding that he has also caught vagrants living in the house. “I am sick of it, and no one cares.”
In addition to being dangerous, Mr. Vatter says, zombie homes drive down property values and drive up insurance rates.
The fire chief welcomes the idea of a registry but said it is almost impossible to get the banks to take responsibility. He recalled the time a Newburgh resident tracked down the bank that owned a broken-down property. The bank hired someone to mow the lawn. “The guy showed up with a push mower,” he said. “I just said, ‘You have got to be kidding me.’ ”
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Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders, and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.