Safeguard Properties

Sullivan County Applying to Form a Land Bank

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Land Bank Update
June 20, 2016

MONTICELLO — Sullivan County officials are preparing to file an application with the state to form a land bank that will initially focus on blighted areas in the villages of Monticello and Liberty.

County Manager Joshua Potosek said the application to New York State Empire State Development will be made in the next week or two.

If approved, the county land bank would be one of just 20 allowed by the state.

“The biggest challenge right now is getting an application in before the 20 authorized land banks are approved,” Potosek said Monday. “… We think there are only a few slots left. Assuming we can get our application in before the 20 slots are exhausted, I’m confident that we can demonstrate the need for this in our county.”

In a recent press release announcing the application, Potosek defined land banks as “government-created, not-for-profit corporations established to acquire and stabilize vacant, abandoned and derelict properties. After eliminating barriers to redevelopment, land banks transfer properties to responsible ownership and productive use in accordance with local land use goals and priorities.”

The proposed Sullivan County Land Bank would be a tool to help correct market deficiencies and encourage neighborhood reinvestment, particularly in the villages of Monticello and Liberty, along with other efforts such as code enforcement, zoning updates, planning and community involvement, Potosek said.

The county Legislature last week approved spending $100,000 a year for two years as start-up money for the endeavor.

In addition to Potosek, eight other people have been named to the land bank’s board of directors: Sullivan County Treasurer Nancy Buck; Sullivan County Commissioner of Planning Freda Eisenberg; county Legislators Alan Sorensen, Terri Ward and Ira Steingart; Liberty Village Trustee Daniel Wright; Monticello Village Manager David Sager; and Jacquelyn Leventoff, senior director of community and employee relations for Granite Associates.

They will each serve an initial term of at least two years.

The state has no time frame within which to make a decision on the county’s application, Potosek said. “Informally, we have heard it could take around 60 days,” he said.

Source: Times Herald-Record

Proposed New York Legislation Targets Foreclosure Policy

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Legislation Update
June 1, 2016

A.4842

  • Title: Requires plaintiffs in mortgage foreclosure actions to provide contact information
  • Last Action: Amended on third reading on 6/1/16.
  • Sample Text: Section 1. Section 1307 of the real property actions and proceedings law is amended by adding a new subdivision 9 to read as follows:
    A mortgage foreclosure plaintiff with a duty to maintain foreclosed property shall provide the contact information of the employee or agent of the plaintiff responsible for maintenance of the foreclosed property. Such contact information shall include, but not be limited to, a direct telephone number and the name of the employee or agent of the plaintiff responsible for maintenance of the foreclosed property. Such contact information shall be provided to the municipality in which  the  foreclosed property is located through written notice to the chief financial officer of the municipality and shall be posted on any vacant dwelling or any dwelling that becomes vacant after the issuance of the judgment of foreclosure and sale.

A.8559

  • Title: Relates to providing notice to a homeowner whose property is being foreclosed that they do not have to abandon the property until the day of the foreclosure sale
  • Last Action: Referred to judiciary on 1/6/16.
  • Sample Text: Section 1. Subdivision 3 of section 1303 of the real property actions and proceedings law, as amended by chapter 507 of the laws of 2009 and as further amended by section 104 of part A of chapter 62 of the laws of 2011, is amended to read as follows:
    The notice to any mortgagor required by paragraph (a) of subdivision one of this section shall appear as follows:
    Help for Homeowners in Foreclosure
    New  York  State  Law  requires that we send you this notice about the foreclosure process. Please read it carefully.
    Summons and Complaint
    You are in danger of losing your home. If you fail to respond to the summons and complaint in this foreclosure action, you may lose your home. Please note: You have the right to remain in your home until you receive a court order telling you to leave the property. This is not an eviction notice and you still have the right to remain in the home until a court orders you to leave. You legally remain the owner of and are responsible for the property until the property is sold by you or by order  of the court at the conclusion of this foreclosure action. If you live in the property you have a right to a settlement conference in court at which you can try to negotiate a loan modification that will permit you to keep your home.

Source: New York State Assembly

Additional Resources:
A.4842 (full text)

A.8559 (full text)

Menendez Announces Legislation to Address NJ?s Worst-in-the-Nation Foreclosure Crisis

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Updated 7/12/16: The “Preventing Abandoned Foreclosures and Preserving Communities Act of 2016” (S.3146) has been officially introduced and referred to the Committee on Banking, Housing and Urban Affairs.

Link to bill text 

Legislation Update
June 24, 2016

‘Zombie’ foreclosures threaten home values, neighborhoods

EAST ORANGE, NJ – U.S. Senator Bob Menendez today unveiled federal legislation that takes aim at zombie homes that plague New Jersey communities and drive down property values.  New Jersey had the highest foreclosure rate in the nation in 2015 with over 35,000 filings and a recent report found the state has the most vacant zombie foreclosures in the nation with over 4,000.

“Zombie foreclosures threaten our communities and scare away new homebuyers and investors, which leads to neighborhood blight and plummeting values of surrounding properties,” said Sen. Menendez, Ranking Member of the Senate’s Subcommittee on Housing, Transportation, and Community Development.  “We need to do all we can to keep families in their homes and ensure mortgage lenders are invested in the communities they serve.  This legislation stands up for New Jersey’s struggling homeowners, and prevents the banks from turning their backs on borrowers, on their neighbors, and on the community at large.”

A zombie foreclosure occurs when a mortgage servicer files for foreclosure, the distressed homeowner moves out, and then the mortgage servicer walks away from the property without completing the foreclosure.  And with no notice to the homeowner or the town or city in which the property is located, the mortgage servicer leaves the abandoned property in legal limbo and the homeowner and the community on the hook for taxes and fees.

Specifically, Sen. Menendez’s Preventing Abandoned Foreclosures and Preserving Communities Act of 2016:                                                                                   

  1. Requires mortgage servicers to tell borrowers at the beginning of the foreclosure process they can remain in the home until state law requires them to leave.
  2. Requires the servicer to make clear to the borrower he or she remains responsible for the payment of any taxes, assessments, and other fees during the foreclosure process.
  3. Requires the mortgage servicer to make prompt notifications to both the borrower and the municipality where the property is located when it walks away from the foreclosure.
  4. Prohibits mortgage servicers on loans backed by Fannie Mae and Freddie Mac and insured by the Federal Housing Administration (FHA) from walking away from an initiated foreclosure unless the servicer releases the lien on the property and provides proper notice to the borrower and municipality.
  5. Requires the Government Accountability Office (GAO) and the Consumer Financial Protection Board (CFPB) to study and report on the prevalence and impact of abandoned foreclosures.

Sen. Menendez was joined by housing advocates and local officials outside a zombie home in East Orange to announce the legislation.  East Orange has taken aggressive action within its municipal authority to tackle the blight of zombie homes and abandoned properties harming communities.

“Our neighbors and neighborhoods are still trying to recover from the foreclosure crisis and the outbreak of zombie foreclosures that have menaced our communities,” said Staci Berger, president and chief executive officer of the Housing and Community Development Network of New Jersey.  “Zombie properties are a drag on our economy and a danger to our neighborhoods. We applaud Senator Menendez for his leadership on this issue by introducing policies that would help our communities fight back.”

“I commend Sen. Menendez for introducing this bill addressing one of New Jersey’s biggest foreclosure-related problems — so-called zombie foreclosures, or vacant properties stuck somewhere in the foreclosure process,” said Seton Hall University School of Law Professor Linda Fisher.  “New Jersey retains the dubious distinction of having the highest number of zombie foreclosures in the nation — estimated at over 4,000.  This is partly the result of lenders having little incentive to complete foreclosures when property values are low.  This bill, however, puts the onus on lenders to notify homeowners of their rights and obligations and to notify towns of the status of the home.  When homeowners know who’s responsible, they can actually be responsive, preventing homes from disrepair and borrowers from surprise charges on a home they thought they no longer even owned.”

In January, Sen. Menendez hosted a roundtable discussion in his Newark office with representatives from organizations including the Housing and Community Development Network of New Jersey, the New Jersey Bankers Association and the New Jersey Realtors to develop solutions for dealing with the state’s foreclosure crisis.

Last year, he led a letter to the federal housing and banking regulations, including Department of Housing and Urban Development Secretary Julian Castro and Federal Reserve Chair Janet Yellen about the zombie foreclosure situation in New Jersey and introduced the Preserving American Homeownership Act, that would provide relief to underwater homeowners by creating a program in which banks could reduce the mortgage principal for eligible homeowners and in exchange be entitled to a portion of any increase in the value of the home down the road.

Source: Office of U.S. Senator Bob Menendez

Additional Resource:
HousingWire (Senate to consider wide-ranging bill to address zombie foreclosure “crisis”)

Governor Cuomo Signs Sweeping Legislation to Combat the Blight of Vacant and Abandoned Properties

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Updated 12/14/17: The New York State Department of Financial Services (NYSDFS) issued guidance pertaining to the Vacant and Abandoned Property Law (“Zombie Properties Law”).

Link to guidance

Additional Resources:

NYSDFS (Zombie Property Maintenance Home Page)

Updated 9/20/17: The New York State Department of Financial Services (NYSDFS) issued a press release titled DFS Launches Education Initiative on Vacant and Abandoned Property Law and Reminds Banks and Mortgage Servicers of Their Obligation to Maintain “Zombie Properties”.

Link to press release

Updated 2/23/17: Time Warner Cable News posted an article titled ‘Zombie Property’ Task Force Gets Its House in Order.

Link to article

Updated 12/14/16: The office of New York Attorney General Eric T. Schneiderman issued a press release titled A.G. Schneiderman Announces Additional $20 Million For Homeowner Protection Program, Plus New Grant Program To Prevent Foreclosure Scams, Funded Through Bank Settlements.

Link to press release

Updated 12/7/16: The office of New York Governor Andrew M. Cuomo issued a press release titled Governor Cuomo Announces New Actions to Assist Homeowners Facing Foreclosure and Hold Banks and Mortgage Servicers Accountable For Maintaining “Zombie Properties”.

Link to press release

Additional Resource:

DS News (New York Legislation May Expedite Foreclosure Proceedings)

Link to article 

Updated 10/11/16: The office of New York Attorney General Eric T. Schneiderman issued a press release titled A.G. Schneiderman Announces Nearly $13 million in Awards for Cities to Combat Vacant and Zombie Homes.

Link to press release

Updated 10/11/16: The Monroe County, NY Vacant and Abandoned Property Task Force released a report titled Zombies Among Us.

Link to report

Updated 10/3/16:  The Democrat & Chronicle published an article titled Zombie home task force issues advice to the state.

Link to article

Updated 9/28/16: The office of New York Governor Andrew Cuomo issued a press release titled Governor Cuomo Announces Proposed Regulation to Hold Banks and Mortgage Servicers Accountable for Maintaining “Zombie Properties”.

Link to article

Updated 6/21/16: The office of New York Attorney General Eric T. Schneiderman issued a press release titled A.G. Schneiderman Announces New Grant Program For Communities To Combat Zombie Homes.

Link to article

Updated 6/28/16: The office of New York State Governor Andrew Cuomo issued a press release titled Governor Cuomo Announces Consumer Hotline to Accept Reports of “Zombie Properties” Across the State.

Link to article  

Legislation Update
June 23, 2016

Comprehensive Legislative Package Enhances Mandatory Settlement Conferences and Establishes a Consumer Bill of Rights to Help People Remain in Their Homes, Creates the Community Restoration Fund

Combats Blight Created By Zombie Properties By Imposing a Pre-Foreclosure Duty on Banks and Servicers to Maintain Zombie Homes, Creating an Electronic Registry of Abandoned Properties, and Expediting Foreclosure For Vacant and Abandoned Properties to Get Them Back on the Market

Governor Andrew M. Cuomo today signed legislation to prevent foreclosures and curb the threat posed to communities by “zombie properties.” The bill was passed as part of the 2016 Legislative Session and is a boon for the economic health and public safety of communities and homeowners who would otherwise be at risk of losing their residences. The legislation combats the blight of vacant and abandoned properties by expediting the rehabilitation, repair and improvement of these properties, and enabling the State to assist homeowners facing mortgage foreclosure. The Governor signed the legislation into law, touring the state and visiting affected communities, at events in Syracuse, Manhattan and Long Island.

“For many New Yorkers, homes are our single most important investment, but that investment can be undermined by the blight of neglected and abandoned properties,” Governor Cuomo said. “For each zombie home that we cure and for each that we prevent with this legislation, we are saving entire neighborhoods from the corrosive effect of blight and neglect. I thank my colleagues in the Assembly and Senate for seeing a crisis and helping to turn it into an opportunity for people to realize the great American Dream of homeownership.”

Attorney General Eric T. Schneiderman said: “This law is major victory for New Yorkers living in communities throughout the state, as it will give regulators and law enforcement the tools they need to revitalize neighborhoods that have been devastated by the proliferation of zombie homes. I applaud Assembly Member Weinstein and Senator Klein for their unwavering commitment to revitalizing communities plagued by zombie homes by working with Governor Cuomo to craft an impressive and meaningful legislative package. I also commend Governor Cuomo for making this issue a priority this session and by acting swiftly to sign this bill into law. As I have long said, zombie homes are an enduring legacy of the housing crisis, but thanks to the advocacy of determined elected officials and advocates, and thousands of motivated New Yorkers, we now have a law that will lift-up communities statewide.”

Senate Majority Leader John J. Flanagan said: “Working together, we have passed a responsible measure to address the abandoned and decaying homes in many of our communities known as ‘zombie properties. By doing so, we will reverse blight, protect property values and strengthen our economy for the future. I thank Governor Cuomo and our colleagues in the Legislature, especially Senator Jeff Klein, who as leader of the Independent Democratic Conference and our majority coalition partner, focused on this issue like a laser until we achieved a positive result for the people of New York.”

Assembly Speaker Carl Heastie said: “While our economy has taken strong and sure steps toward full recovery, high foreclosure rates continue to affect New Yorkers around the state. It is critical that we do all we can to help people remain in their homes and keep neighborhoods safe. This agreement will provide the assurance of stronger protections against predatory foreclosure practices, a more expedient process for transitioning these properties to help communities move past foreclosure, and toward opportunities for home ownership.”

Senate Independent Democratic Conference Leader Jeffrey Klein said: “Today is a victory for every community in New York State. From The Bronx to Buffalo, zombie properties impact every corner of our state resulting in blight and diminished property values for surrounding homeowners. I fought to make this law a reality and now banks will maintain abandoned properties stuck in the legal limbo of foreclosure. Broken windows, open doors and falling facades will no longer mar our communities, and if banks fail to comply, our law empowers the Department of Financial Services to take court action, issue violations and fines. I thank Governor Cuomo for signing this into law, and protecting communities throughout the state.”

Senate Democratic Leader Andrea Stewart-Cousins said: “Revitalizing and strengthening our communities is a longstanding priority of both the Senate Democrats and Governor Cuomo. For too long the fabric of our communities have been weakened by these zombie properties and today we can begin moving forward to make sure that our neighborhoods are protected. Stronger neighborhoods help build stronger communities”

The legislation includes several provisions that will help prevent people from losing their homes and addresses the scope of unoccupied and ill-maintained properties, which based on voluntary reporting, is estimated to be over 6,000. Under the new law, reporting is now mandatory, and the number of abandoned homes is anticipated to be even higher.

The legislation includes measures to assist homeowners facing mortgage foreclosure, improve the efficiency and integrity of the mandatory settlement conferences, establish a pre-foreclosure duty to maintain on mortgagees, create an expedited foreclosure process for vacant and abandoned properties, create an electronic vacant property registry, and establish a Consumer Bill of Rights. Specifically, the legislation will:

STRENGTHEN HOME FORECLOSURE PREVENTION SERVICES

  • Enhance the Effectiveness of Mandatory Settlement Conferences: The mandatory settlement conferences became law in 2010 to slow foreclosure and give homeowners a better chance to fight the foreclosure. Since its creation, the number of foreclosure default judgments has declined from 80% to less than 20%. This legislation will enhance the effectiveness of settlement conferences even further for homeowners by prescribing the rights and duties of the parties and clarifying how the process should work to best protect homeowners contesting foreclosures and prevent them from losing their homes.
  • Establish a Consumer Bill of Rights informing property owners of their rights in foreclosure proceeds to prevent people from losing their homes: Some homeowners vacate their homes early in the foreclosure process because they are unclear about their rights or face pressure to vacate. The enhanced notice requirements established with this legislation will alleviate this confusion and reduce the resulting abandoned properties by explicitly informing homeowners of their rights
  • Create the Community Restoration Fund (CRF), a new tool for the State of New York Mortgage Agency (SONYMA) to assist homeowners facing mortgage foreclosure. CRF will purchase defaulted mortgage notes from other lenders and offer favorable mortgage modifications to keep homeowners in their residences. CRF will have the ability to forgive a portion of a loan’s principal and make the loan affordable in areas where home values have declined or where a homeowner has experienced a decrease in income.

COMBAT THE BLIGHT CREATED BY VACANT AND ABANDONED PROPERTIES

  • Impose a pre-foreclosure duty on the banks and servicers to maintain vacant and abandoned properties: Previously, a bank or mortgagee had the responsibility of maintaining a vacant property once a judgment of foreclosure and sale was obtained, creating zombie properties and blight in communities. This legislation places the maintenance obligation on a mortgagee when the mortgagee becomes or should have become aware of the vacancy. Under this law, the bank has a duty to maintain and secure a residential real property where there is a reasonable basis to believe it is vacant and abandoned, and faces civil penalties up to $500 per violation, per property, per day for failing to do so.
  • Expedite foreclosure for vacant and abandoned properties: The legislation offers plaintiffs an option for an expedited foreclosure process on bonafide vacant and abandoned properties that homeowners no longer want. To initiate this process, plaintiffs would make an application for an order to show cause upon notice seeking entry of judgment of foreclosure and sale on the grounds that the property is vacant and abandoned.

The legislation requires a foreclosing party to move to auction within 90 days of obtaining a foreclosure judgment. In addition, a foreclosing party would be required to take action to ensure that the property is reoccupied within 180 days of taking title.

  • Establish electronic registry of vacant and abandoned properties. The legislation will promote communication between local governments and mortgagees responsible for property maintenance.
  • In cases where homes are vacant, CRF will offer a mechanism to expeditiously complete a foreclosure and work with land banks, Community Development Financial Institutions, and other local nonprofits to rehabilitate properties and resell them to new buyers.

State Senator Diane J. Savino said: “The subprime mortgage crisis hurts families and communities and I’m proud that today my legislation creating the Community Restoration Fund becomes law. This program, through the State of New York Mortgage Agency, working in conjunction with a council of housing experts, will use settlement funds to keep families facing foreclosure in their homes by refinancing their mortgages. The Community Restoration Fund will work hand-in-hand with localities, non-profits and land banks to identify and purchase properties from federally distressed pools. In addition, dilapidated, abandoned properties across this state, ones which drag down communities, will also be spruced up and turned into much-needed affordable housing. I thank Governor Cuomo for helping us uplift communities throughout the state and helping struggling homeowners avoid foreclosure while simultaneously reducing blight in our communities.”

State Senator David J. Valesky said: “New York has become flooded with zombie foreclosures over the past several years and thanks to Governor Cuomo and my colleagues in the legislature, we are taking a major step forward in putting a stop to these eyesores. Throughout this state, there are neighborhoods that are on the cusp of turning the corner and thriving once again yet they are being held back by these properties. With this law now on the books, we have the tools we need to help our communities reach their full potentials.”

Assemblywoman Helene E. Weinstein, Chair of the New York State Assembly Judiciary Committee, said: “It is critical that we pursue every avenue to hold banks accountable and to help New Yorkers remain in their homes. Unfortunately, so many properties that have been abandoned go on to become a burden and an eyesore to the surrounding community. The provisions of this legislation relating to foreclosure would strengthen the rights of homeowners in foreclosure proceedings, keep families in their homes longer, and require banks and their mortgage servicers to maintain abandoned properties in their portfolio to prevent any further neighborhood destabilization. I commend Governor Cuomo for joining with us to enact these homeowner protection and community preservation proposals. “

Assemblywoman Pamela Hunter said: “Zombie properties are a scourge on our communities and prevent emerging neighborhoods from truly flourishing. As these properties become dilapidated and forgotten, they not only discourage businesses from investing in that neighborhood, but they drive down the value of surrounding homes. Getting rid of these blights is an absolute necessity and I want to thank Governor Cuomo for his past efforts and his leadership in ensuring that this bill became law.”

Assemblyman Charles D. Lavine said: “Working together under Governor Cuomo’s leadership, the Assembly and Senate have passed highly comprehensive legislation that will protect our communities and our citizens from the blight of abandoned and deteriorating houses. Because the safety of our neighborhoods must continue to be government’s first priority, I am extraordinarily gratified that our Long Island community will now be protected by this most incisive and significant law.”

Assemblyman Michael Kearns said: “The Foreclosure Relief Act has been created to help fight the “Zombie Crisis” in our communities since 2008. Proactive engagement by neighbors, courts, municipalities and banks is required to increase the likelihood of success. To reverse the effects of zombies will require engagement, education, enforcement and execution by all stakeholders interested in removing bank created blight in our neighborhoods. All of us with zombie properties need to be active and informed concerning the new law’s protections, so we meet the challenges of this crisis. I thank Governor Cuomo for signing these bills into law today.”

Suffolk County Executive Steve Bellone said: “From Smithtown to Sag Harbor, unoccupied and ill-maintained homes have directly contributed to the degradation of neighborhoods and communities. These zombie properties have had especially devastating consequences on towns that have already been ravaged by foreclosure and economic instability. I commend Governor Cuomo, and our leaders in the Senate and Assembly, for taking decisive action to end the scourge of zombie properties and making our communities stronger and safer for generations to come.”

Onondaga County Executive Joanie Mahoney said: “Abandoned and dilapidated properties are not just a problem on Onondaga County or in Central New York—they plague communities across the state and country. Governor Cuomo is leading the nation to tackle the issue of “zombie” properties on multiple fronts, and this new law will result in better neighborhoods and a better quality of life throughout New York.”??

Commissioner of NYS Homes and Community Renewal, Jamie S. Rubin said: “This is a great day for New Yorkers living in communities that have endured the blight of “zombie” properties and for homeowners on the brink of foreclosure. Governor Cuomo has given New York powerful tools to tackle the problem of vacant properties that plague too many communities and to reduce the risk of more homes becoming abandoned and empty. Together these bills will help families stay in their homes and remove abandoned properties from neighborhoods. These are real investments in improving lives and communities across New York State.”

Superintendent of Financial Services Maria T. Vullo said: “This groundbreaking legislation provides relief to cities and towns throughout New York State that are suffering the consequences of unmaintained vacant and abandoned properties. It improves and expands upon the best practices that DFS established, by now legally requiring the obligation to maintain for all banks and mortgage servicers in New York and also establishing an expedited foreclosure process. I applaud Governor Cuomo and the Legislature for taking decisive action and stand ready to enforce the law to combat this growing epidemic.”

ADDITIONAL INITIATIVES TO COMBAT ZOMBIE PROPERTIES

The FY 2017 Budget invests nearly $20 billion for comprehensive statewide housing and homelessness action plans. Over the next five years, the $10 billion housing initiative will create and preserve 100,000 affordable housing units across the State, and the $10 billion homelessness action plan will create 6,000 new supportive housing beds, 1,000 emergency beds, and a variety of expanded homelessness services.

As part of the Governor’s ongoing efforts to assist future homebuyers and existing homeowners, this investment includes more than $100 million in available funds to help new homebuyers purchase and renovate “Zombie” properties and support existing low- and middle-income homeowners with major repairs and renovations. Funding is available through the New York State Homes and Community Renewal to establish the new Neighborhood Revitalization Program and provide grants for not-for-profit organizations and municipalities throughout the state to rehabilitate, repair and improve homes.

President and Chief Executive Officer, Long Island Partnership, Inc. Peter J. Elkowitz, Jr. said: “We thank Governor Cuomo for making it a priority to address this widespread problem. If we could customize a program to mitigate the effects of these vacant properties on Long Island, this is the way it would look. This is how state and local governments work together for the people of New York. The DFS bill, combined with HCR’s Community Restoration Fund will go a long way to improving the quality of life for many Long Islanders and revitalizing communities in Nassau and Suffolk counties.”

Executive Director of the Center for NYC Neighborhoods, Christie Peale said: “We commend the Governor and leaders in the state Legislature for brokering a deal that will help communities statewide to recover from the foreclosure crisis. With the Community Restoration Fund, policymakers will have a new tool to help homeowners at risk of foreclosure. And the reforms for tackling ‘zombie’ properties will also help to stabilize neighborhoods where derelict properties have proliferated in recent years. These are major victories for homeowners in New York.”

Executive Director of Home HeadQuarters, Kerry Quaglia said: “One abandoned property in disrepair can affect an entire block and they frustrate residents and visitors alike. These bills give us the tools we need to correct the problem of vacant homes and buildings that negatively impact our neighborhoods. I am grateful to Governor Cuomo for addressing the problem of zombie properties in Upstate New York.

Source: Office of New York State Governor Andrew Cuomo

Additional Resources:
S8159 (full text)

YouTube (full press conference video)

DS News (New York Takes Aim at Zombie Properties)

Albany Times-Union (Zombie Property Bill become Law!)

Foreclosure Firm Cleared of FHA Loan Deficiency Liability by Federal Court

Posted on by Safeguard

Legislation Update
June 9, 2016

FORECLOSURE FIRM DID NOT VIOLATE FDCPA BY ALLEGING THAT MORTGAGOR ON FHA INSURED LOAN WAS PERSONALLY LIABLE FOR DEFICIENCY, FEDERAL COURT HOLDS

A federal district court in Illinois recently dismissed a putative class action against a foreclosure firm, holding that an allegation in a foreclosure complaint that the mortgagor is personally liable for any deficiency on a Federal Housing Authority (FHA) insured loan is not a violation of the Fair Debt Collection Practices Act (FDCPA).

In the case, the plaintiff obtained an FHA insured loan and subsequently defaulted. The underlying foreclosure complaint specifically identified the plaintiff, the mortgagor, as personally liable for any deficiency.

In response, the plaintiff filed an independent FDCPA action against the foreclosure law firm, claiming that it was not truthful for the firm to allege in the foreclosure complaint that plaintiff is personally liable for any deficiency. According to the plaintiff, this allegation was false and misleading because, under FHA regulations and guidelines, it was virtually certain that the FHA would not authorize or require that a deficiency be pursued against the plaintiff.

The court held that a foreclosure complaint may include such an allegation because, under Illinois mortgage foreclosure law, the borrower is in fact the party liable for any deficiency following the foreclosure action, regardless of the likelihood that the FHA would request or require that a deficiency be pursued. In addition, the court noted that nothing in the FHA regulations or guidelines required that a mortgagee obtain FHA authorization prior to the mortgagee seeking a deficiency. As such, the court held that defendant’s allegation in the foreclosure complaint that the plaintiff is personally liable for any deficiency was a true statement, and did not violate the FDCPA.

Source: Ballard Spahr LLP

Expedited Foreclosure Process Bill Introduced in New Jersey

Posted on by Safeguard

Updated 4/30/18: NJ A3823 (“Concerns expedited process for foreclosing vacant and abandoned residential properties in uncontested actions”) has been changed to A2085 for the current session and remains in the Assembly Housing and Community Development Committee. An identical Senate bill, S1243, is a carryover of S1832 from the previous session and is pending in the Senate Community and Urban Affairs Committee.

Link to bill text 

Updated 12/18/17: NJ A3823 (“Concerns expedited process for foreclosing vacant and abandoned residential properties in uncontested actions”) was reported out the Assembly Appropriations Committee with amendments and a second reading on December 18.

Link to bill text

Legislation Update
May 26, 2016

Statement
This bill provides an expedited process for residential mortgage lenders to foreclose vacant and abandoned residential properties and enhances the remedies available to common interest communities when lenders delay the foreclosure of vacant and abandoned properties.
The bill provides that a residential mortgage lender may file a motion to proceed summarily to foreclose vacant and abandoned property if the foreclosure action is uncontested as defined pursuant to R.4:64-1(c) of the Rules Governing the Courts of the State of New Jersey.
The bill requires any defense or objection to an application to proceed summarily to foreclose vacant and abandoned property to be accompanied by an affidavit stating that the defense is not made solely for the purpose of delaying the relief requested pursuant to the summary action.  The defense or objection must be presented within 30 days of the filing of the service of the application.  Any defense or objection that is presented without the affidavit, or that is not presented within the 30 day time period, shall not be considered by the court, except for good cause shown.
The bill requires the Superior Court to order payment by a plaintiff of $1,000 as a fee for costs associated with the use of the summary process for vacant and abandoned properties, which shall be retained by the Administrative Office of the Courts in a non-lapsing account for use by the Office of the Superior Court Clerk.

Under current law, a residential mortgage lender may commence a summary action to foreclose a mortgage debt in Superior Court if the court finds that at least two out of 15 conditions exist that indicate the property is abandoned.  This bill adds to this list a certification from the board of a planned real estate development stating with specificity that the property has been observed to be abandoned.

This bill also provides that, when a lender is entitled to proceed through the foreclosure process in a summary manner, but has not done so, the board of a planned real estate development may file a motion to compel expedited judgment and sale, or in the alternative, payment of association fees.  The bill requires the motion to be accompanied by an affidavit from a person having personal knowledge of the contents and shall contain the facts necessary to establish that the action is uncontested.  The Superior Court shall subsequently enter an order compelling the lender to file an application to proceed in a summary manner within 30 days or, where the lender declines to file that motion, to pay to the planned real estate development the assessments for periodic payments due for regular and usual operating and common area expenses coming due on or after the thirty-first day following entry of the order to pay.

Alternatively, the court may approve an application for an Order Appointing a Fiscal Agent.  The bill allows the board of a common interest ownership association to apply to the Superior Court for an Order Appointing a Fiscal Agent over an abandoned or unoccupied unit.  The fiscal agent will be responsible for maintaining the unit and paying, through a licensee or otherwise, maintenance fees and assessments for benefits such as utilities, common element expenses, amortization of common elements, administrative costs and maintenance of the physical structure in order to protect, preserve and maintain the unit for the benefit of the planned real estate development, the unit owners in the common interest community and any others with an interest in the unit, including, without limitation, mortgage holders.  The fiscal agent is also intended to prevent the impairment of the utility of the unit for the association, the other unit owners in the planned real estate development, and others with an interest in the unit such as a mortgage holder.

Under the bill, when a fiscal agent receives payments, the fiscal agent must deposit the payments in a banking institution in its name as the fiscal agent and shall pay the association the following charges:
(1) 10 percent of the payment due pursuant to any license agreement issued by the fiscal agent to reimburse the association for the purposes of managing receivership;
(2) current maintenance fees on a monthly basis; and
(3) any prior past due maintenance fees, assessments, late charges, interest and reasonable counsel fees and costs, until paid in full.

Upon application of the rent or any other payments, including, but not limited to, reimbursement to the receiver of any and all costs incurred to rehabilitate the unit to make it habitable, and once the rent or other payments satisfy in full the underlying debt due to the association for delinquent fees and charges assessed to the unit, further monthly payments are to be applied on a pro rata basis to:
(1) the association to satisfy monthly maintenance fees or assessments as may be applicable; and
(2) monthly mortgage debt payment amortization, except that the payment shall not include any acceleration of principal or interest due to a default under the terms of the loan.

Source: New Jersey Legislature

Additional Resources:
S2156 (full text)

S2545/A3793 (bill info)

Safeguard Properties Fast-Track Legislation Resource Center

Death of Defendant During Pendency of Connecticut Foreclosure Action ? Appellate Case Update

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Legislation Update
June 14, 2016

The Connecticut Appellate Court has weighed in on the topic of whether or not a lender foreclosing a mortgage in Connecticut must comply with the statutory process to make the administrator of the decedent a party to the action to ensure a proper judgment of foreclosure enter…sort of.

In the matter of HSBC Bank USA, N.A. v. Lahr, the defendant challenged the Superior Court’s denial of a motion to open and vacate a judgment of strict foreclosure entered by the Superior Court some seven months after the filing of a suggestion of death of another defendant-mortgagor and obligor of the promissory note.  The surviving defendant claimed that the Plaintiff could not proceed with the foreclosure until such time as a motion to substitute the administrator of the estate of the decedent was filed and granted pursuant to Conn. Gen. Stat. § 52-599.

The Plaintiff, in turn, responded that since a notice of lis pendens was recorded at the commencement of the action, it was not required to proceed under section 52-599 nor take any other action since any interest acquired in the property after the recording of the lis pendens would be bound by the proceedings in accordance with General Statutes section 52-325.

Unfortunately, the Appellate Court did not reach the merits of either contention by the parties (i.e. in favor of defendant that a motion to substitute the administrator is required or in favor of plaintiff that the lis pendens statute applies). Instead, the Court found an alternate ground for affirming the denial of the defendant’s motion.  The Court opined that Conn. Gen. Stat. § 52-600 permits an action with more than one defendant to proceed unabated despite the death of a co-defendant once the death is noted in the record of the proceedings.

It is extremely important to note that one of the major factors relevant to the Appellate Court’s decision in Lahr was the procedural posture which limited its scope of review.

Since the appeal period from the entry of the judgment of strict foreclosure had already elapsed at the time of the filing of the Defendant’s motion to vacate the judgment, the Appellate Court was limited to the standard of review inherent to a motion to open a judgment of foreclosure known as the “abuse of discretion” standard.

So… what do we learn from this case?

Well, it is still a difficult area to navigate when a party to a foreclosure dies after the commencement of the action and at any time before vesting of title.  It would appear that a foreclosing lender, so long as there is more than one party defendant named to the action, can proceed with the underlying action under General Statutes section 52-600 so long as a suggestion of death or other procedural filing is made at the time of or upon discovery of the death.  Conversely, if the decedent is the sole party defendant in the action the question of whether or not the mortgagee must comply with section 52-599; cite the heirs of the decedent as parties in interest; or simply proceed with the action in reliance on the lis pendens statute remains unresolved.

Source: The National Law Review

County Identifies Responsible Parties to ?Zombie? Properties

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Industry Update
June 8, 2016

Assemblyman Michael Kearns lodged his first complaint with the State Department of Financial Services Friday after having received more than 1,100 reports of “zombie” properties.

“Many people within Western New York still wanted to be part of this campaign. We came up with a way for them to participate and so their voices could be heard,” Kearns said.
 
Working with the Western New York Law Center, Kearns began his Complaint Campaign to Combat Zombie Properties four weeks ago at the West Seneca Senior Citizens Center. His goal for the day was 100 filings.
 
Now, his goal is 10,000 complaints, and already he has received responses from Hamburg, Clarence, Lancaster,

Williamsville, Buffalo, Niagara Falls, Cheektowaga, West Seneca, Orchard Park, Tonawanda, Lackawanna, Grand Island, Colden, Elma and East Aurora.
 
Acknowledging that he was on his own in this battle, the assemblyman began creating his own database of incomplete foreclosures.
 
“Last week we announced that we had approximately 2,300 properties. We’ve linked approximately 600 banks to those properties,” Kearns said. “With this new information, I feel as though we will be able to link every zombie property with a bank, and we’ll be able to hold them accountable and responsible.”
 
His efforts began nearly one year ago with the Bank Shame Campaign — an effort to embarrass the agencies responsible for properties which had been left vacant or abandoned.
 
New information has now been posted on the Erie County Real Property Tax Services website.
 
According to a press release from the office of Erie County Executive Mark Poloncarz, the new information identifies individuals, banks or agencies that have paid the property taxes on any given property in Erie County.
 
“In the past we’ve had to do research to try to figure out what bank is involved with a property and now we’ll be able to look and see if a foreclosure is filed and check the county website to see what servicer is paying the taxes,” said Kate Lockhart of the Western New York Law Center Distressed Properties Task Force.
 
She said this is a good way to link banks with properties sooner to continue the campaign’s push for a reform of the foreclosure process and a solution to vacant and abandoned properties.
 
Kearns said he spoke to Robert Freeman from the Committee on Open Government who confirmed that third party taxpayer records of this type are public information. Kearns originally requested this information be added to the website in early May.
 
In a letter to Joseph Maciejewski, director of Real Property Tax Services for the county, Kearns said this information is essential to assist his office in combating zombie properties.
 
“Numerous banks have been uncooperative with respect to the upkeep and maintenance of properties throughout Erie County,” he continued. “As we approach the summer months these nuisance properties will continue to drag down housing values for all Erie County homeowners unless we are able to hold the banks accountable.”
 
Lockhart said many of the complaint forms they have received have included personal notes of frustration and distress from homeowners with “zombie” properties in their neighborhood.
 
“I just think it speaks to what Western New Yorkers are going through in dealing with this problem, and it’s very important to not get caught up in the fact that, yes, we have zombies here,” she said. “We don’t want to become numb to this. It’s affecting people’s quality of life here.”
 
The weighty stack of more than 1,100 complaints will soon make its way to the state, and Kearns said he is using this as a warning.
 
“Be prepared for thousands of complaints going forward,” he said. “We are going to be expanding this throughout the State of New York.”

Source: Ken-Ton Bee

Additional Resources:
Ken-Ton Bee (Light shed on ‘zombie’ property ordeal)

Office of Mark C. Poloncarz (EC Real Property Tax Services Expands Online Information)

Congress to Consider Changes to Controversial CFPB Complaint Database

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Legislation Update
June 13, 2016

New bill would require verification of complaint details

When the Consumer Financial Protection Bureau began publishing consumers’ complaints against financial services companies several years ago, many of those companies and other industry observers took issue with the fact that the complaints were, in many cases, unverified and unproven.
 
But that could be about to change, thanks to a new bill that Congress is set to consider soon.

The new bill, entitled the CFPB Data Accountability Act, was introduced into the House of Representatives last week by Rep. Matt Salmon, R-AZ, who said that the CFPB’s database, in its current format, is confusing to consumers and is not as usable as it can be.
 
“Under current law, the CFPB launched a Consumer Complaint Database that serves as a mechanism to inform the consumer about potentially troublesome institutions,” Salmon said in a statement.
 
“We owe it to the American people to make this information as accurate and as clear as possible,” Salmon continued.
 
“Unfortunately, the current database is disorganized and does little to provide the American people with important information to inform their decision-making,” Salmon said.
 
“My bill would improve the current database by requiring the CFPB to verify the facts of each complaint and present this information in an aggregated format so that consumers have better access to CFPB-collected data and can make better decisions about their financial futures,” Salmon added.
 
If enacted, the bill would require the CFPB to “verify and put into context” the consumer complaints it receives and presents to the public.
 
“By verifying these complaints with evidence of actual wrongdoing, Americans will have a greater understanding of various financial products and be better informed of any violations committed by these institutions,” Salmons office stated.
 
Specifically, per the legislation text, Salmon’s bill would require the CFPB to “verify any consumer complaint information…where the complaint alleges a violation of a law, regulation, or contractual agreement between a consumer and a covered person who offered or provided the consumer financial product or service to the consumer.”
 
Additionally, the CFPB Data Accountability Act would require the CFPB to present the complaint data in an aggregated format and only after the CFPB ensure that “proprietary, personal, or confidential consumer information” is not made public.
 
Salmon’s bill would also require the CFPB to quantify and clarify the nature and number of consumer complaints about a particular consumer financial product or service by accompanying said complaints with the total number of consumers that are using that particular consumer financial product or service.
 
Salmon’s bill is currently set for review by the House Financial Services Committee. If it passes out of committee, it will proceed to the full House for review.

Source: HousingWire

What?s Next for REO? A 10-Year Perspective

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Industry Update
May 3, 2016

A 10-Year Perspective on the Golden Goose Egg of the Financial Crisis

Editor’s note: This select print feature originally appeared in the May 2016 issue of DS News.

Anyone in real estate during the aftermath of the mid-2000s financial crash would likely agree that the real estate owned (REO) market was a bright light in real estate during the high default environment. Just look at what was happening: The boom of opportunistic construction starts across markets was squashed out by the reality that potential buyers had limited cash on hand or financing options to purchase those properties. Simultaneously, homeowners across the country found it difficult to pay down their mortgages.

REO, foreclosures, and short-sales have always been around, but the environment nearly a decade ago, when aged REO inventories skyrocketed and prices dropped, led to dramatic growth and opportunity in what was typically a sleepier real estate sector – one that always served a purpose, but largely existed under the radar.

As the REO market adjusted to new levels of inventory, business models on Wall Street shifted to take advantage of the opportunity within the high default environment, which gave way to the rather nascent but thriving sector of the single-family rental market. Wall Street investors were the first to see the enormous potential that the market conditions provided. Household investment firms, like Blackstone, parlayed the strong REO inventory into a profitable real estate play. According to a 2013 Wall Street Journal report, “Blackstone Group LP [became] the biggest U.S. investor in single-family rental homes by spending more than $1 billion since the start of 2012 to acquire more than 6,500 foreclosed houses in eight metropolitan areas.” As of 2015, it held 50,000 houses, nationwide.

The New Frontier of REO

While the single-family rental market is one area that will continue to provide opportunity in the REO marketplace, the question remains: What’s next for the banks, servicers, and investors who touch the REO sector nearly a decade past its high?

California was and continues to be the key state for REO, along with Arizona and Florida. Below state markets, at the city level, we continue to see the same names as 10 years ago, such as Atlanta and Dallas. These regional market opportunities are one aspect of REO that has largely been untouched by the years. Those aforementioned areas continue to provide the most opportunity to investors, indicating that they will continue to play there—for now. Looking forward, while there are a number of factors at play for what drives REO in a market, a good rule of thumb is where there is a boom, there is also the potential of a bust. Arizona is a prime example of that basic economic tenet at work.

The biggest macro factor affecting the REO sector today is that aged REO property inventory is declining. However, the high volume the sector experienced in recent years was unprecedented and, in fact, asset management servicing firms, banks and investors had to adapt to address the upward shift. What we’ve seen recently is a normalizing of inventory levels.

In the peak years, there was a wealth of, for example, 180 day past due accounts on the books or older. This became the norm in terms of aged properties. As the number and length of aged properties repositions, dwindles and largely goes away, new property types in earlier stages of their lifecycles have become increasingly popular among investors looking to build out their portfolios.

Second to the impact of inventory changes is the advent of online auction platforms. To put it bluntly, ten years ago they didn’t exist. Now, they not only exist, but they are playing a major role in how, when and where investors are looking and bidding on properties.

Additionally, they’ve opened the market up to non-traditional investors to begin to evaluate or even participate in the process. From a consumer perspective, the innovation in online auction platforms, coupled with the notoriety the boom led to, has to a large extent led to REO becoming a more mainstream and accessible part of the real estate sector.

However, for realtors and agents, the online auction platform has been a notable disruptor. But it doesn’t have to be all or nothing. In fact, the most well-rounded online auction platforms will be realtor-friendly and find ways to capitalize on their value and complement the online auction offering.

In such a changed marketplace, examining what’s happening today in REO asset management, banking and investing 10 years post its rise is an importance retrospective to explore.

The servicing market has changed dramatically since the recession, becoming incredibly efficient as a result of having to respond to and effectively manage the extraordinary period of volume. As we emerge into a more stable REO environment, asset management servicing firms are in a better position than ever to deal with REO assets. However, given the change in opportunity and inventory levels, servicing professionals must remain educated about the changes occurring in the marketplace so that their organizations have the necessary knowledge to maximize returns.

Emerging Trend: Outsourcing

In order to operate in this new normal, servicing firms need to regularly review their expenses and ask critical business questions: What is the price in fixed costs to the company to do this work vs. what it would cost them to outsource it? At some point those lines cross, and when they do, it may make “good” business sense to pass the baton.

Now that servicers aren’t simply reacting to the high inventory environment, they should slow down to speed up – i.e., they should spend the time re-examining how REO fits into their business structure. If it’s not falling into a critical core competency, that may be a trigger for outsourcing.

The first thing that servicing firms should consider is the compliance-oriented environment that we live in when outsourcing. In such a highly regulated mortgage and banking industry, where servicers are being held responsible for what vendors are doing, they could end up spending a lot of money on the oversight and monitoring of multiple vendors.

In an outsourced business model, consider minimizing providers and maximizing the single vendor approach for title management, property valuations, inspections, auctions and realtor services.

Revival vs. Disposal

For many years, REO assets that took up the majority of an asset manager’s portfolio were significantly time-worn. As the market moves upstream and portfolios are rounded out with more viable assets, coupled with the opportunity provided by contingency financing, asset managers should evaluate returns on renovations. That’s something that is certainly coming of age. Looking forward, this could be one aspect of the REO market that picks up speed and captures increasing interest from the broad spectrum of industry professionals on both the servicing side and among investors.

Banking in REO in 2016

Banks are being pushed by Wall Street to get better numbers, and the way to do that is by reducing expenses, which comes directly from shedding costs. REO is a good place to do that—especially because of the dwindling inventory.

Similar to servicing firms, the major decision playing out at many banks today is whether to manage REO themselves, outsource it, or shed the category altogether.

During the recession, every lender had to contend with REO, many very reluctantly. However, as volume declines, banks and other financial services companies now have the flexibility to decide whether to stay in the business, and if so, how best to manage it.

One of the prevalent trends is the rise of the non-bank lender holding REO. Some banks are shedding portfolios and asset managers and nonbanks are picking them up because they are more committed to the REO business and the focus and resources that it requires. This consolidation of the customer base is leading to more methodical procurement and vendor management teams that are asking challenging questions about liability and recourse before selecting a partner – a notable shift from only a couple of years ago when having the capacity to support a lender was the primary decision making factor.

Investing REO in 2016

The findings align with the movement in the market. New investors, such as traditional home buyers, flippers and mom and pop investors, are now competing for space in the marketplace, while aged inventory declines. These “new” investors may have been eyeing REO for years, but faced certain barriers to entry that are now lifting. This is largely occurring because the 100 percent all cash model is being offset by the availability of contingency financing. Additionally, as the assets become more viable, sellers are now open to accepting different financing options because they want to get the right buyers into the properties vs. driving transactions that result in liquidation.

Technology and easy access to market data will be a critical driver of the market moving forward for both large-scale investors and new ones. REO participants across the board will be able to make smarter purchasing decisions by analyzing potential property cash flow, post renovation projections, or analytics on an occupied property to determine the right offer price in relation to the potential ROI.  Additionally, technological innovation in the online auction marketplace has created opportunity for geographical portfolio diversification, which will be increasingly important in a more competitive marketplace. It’s the difference between making an offer on the courthouse steps or placing a bid on a property in Florida while sitting in DC.

In a post default environment with shrinking inventory, the REO marketplace is evolving to exist and flourish in this new normal, where new breeds of investors, technology and information will not only change the sector but bring it into its next iteration.

Source: DS News