New York Gov. Andrew M. Cuomo has announced that two additional mortgage companies—First Niagara and Carrington Mortgage—will adopt a set of best practices to help combat the neighborhood blight and economic damage caused by vacant and abandoned "zombie properties." With the announcement, a total of 13 banks and mortgage companies representing approximately 70 percent of the New York market have now agreed to adopt these best practices.
"Ensuring that abandoned properties do not fall into extreme disrepair keeps neighborhoods lively and prevents taxpayers from carrying the expense," Gov. Cuomo said. "Mortgage companies can take simple steps and use best practices to help this problem, and I applaud the two businesses today who have committed to doing so."
Under these best practices, the banks and mortgage companies will regularly inspect properties that fall into delinquency to determine if they are vacant and abandoned, and make sure that those properties are safe and properly maintained, among other measures. The banks and mortgage companies will also report properties determined to be vacant and abandoned to a state registry that will be developed by the New York State Department of Financial Services, which will share that information with local government officials. The Department will work with those local officials to address and escalate any concerns about maintenance with the bank or mortgage company that is servicing the loan.
“The influx of zombie properties present in our communities following the financial crisis present both a danger to local populations and to the long-term health of the mortgage market," said Anthony J. Albanese, Acting Superintendent of Financial Services. "These important actions are an immediate and crucial part of repairing that damage as we continue to pursue additional legislative reforms. We look forward to continuing to work with local officials, mortgage companies, and other stakeholders in addressing the vital problem of zombie properties.”
Vacant and abandoned properties are a significant problem throughout New York State, causing blight and safety hazards, and creating significant taxpayer expenses for local communities. This issue is exacerbated by a protracted foreclosure process and the damage caused by the financial crisis. Under existing law, property owners are responsible for the maintenance of their properties and, thus, banks and mortgage companies are not required to maintain vacant and abandoned properties until they receive a judgment of foreclosure, often three years or more after filing for foreclosure. During this limbo period, some properties may fall into disrepair, and worsen safety issues.
The Department of Financial Services convened a group of the nation’s largest banks and mortgage companies—both those it regulates and those it does not—to help address this problem. Among the protections provided by the best practices announced today, banks and mortgage companies will conduct an exterior inspection of a property within 60 days of delinquency to determine vacancy and abandonment, and then every 30 days thereafter. If the property is determined to be vacant and abandoned, the bank or mortgage company will secure each unit at the property by changing the lock, replacing or boarding up windows, posting the property with contact information, and eliminating other safety hazards. Then, on an ongoing basis, the bank or mortgage company will monitor the property’s condition to ensure it remains secure and that it complies with applicable provisions of the New York maintenance code (e.g. the grass must be cut, and conditions at the property must be safe and sanitary). The best practices are applicable to first-lien mortgages on residential homes and subject to existing laws, and insurer and investor guidelines.
After these best practices are adopted and the registry has been created, participating banks and mortgage companies will notify the Department of Financial Services of any new properties they have determined to be vacant and abandoned and the agency will share this information with local officials across the state. The Department of Financial Services will accept complaints from neighbors or local officials about the properties.
The banks, credit unions, and mortgage companies that are adopting these best practices, which represent approximately 70 percent of the New York market include: First Niagara, Carrington Mortgage, Wells Fargo, Bank of America, Citi Mortgage, Ocwen, Nationstar, PHH, Green Tree Servicing, Astoria Bank, Bethpage Federal Credit Union, M&T Bank, and Ridgewood Savings Bank.