Last week, the city of Troy filed suit against a lender and a mortgage servicer, alleging the companies failed to comply with New York real property laws requiring that vacant residential properties tied up in foreclosure be maintained.
Behind the lawsuit is the Zombie Property and Foreclosure Prevention Act of 2016, which puts the onus on banks and servicers to make sure that homes abandoned by owners who can no longer pay the mortgage don’t become neighborhood eyesores before a final judgment of foreclosure is secured.
The law is a new tool for communities that saw “zombie” properties multiply in the Great Recession’s housing collapse. It requires that lenders/servicers register abandoned one- to four-family homes – a list the state will share with localities – and keep them from becoming health and safety hazards. Failure to do the latter can result in a fine of $500 per day per violation.
The Troy lawsuit alleges 66 violations at the home in Lansingburgh, documented by code enforcement officer photos, including failure to repair a damaged roof, to seal up broken windows, to remove fallen trees and brush piles, and to clean out an accessory garage.
Kate Lockhart, vacant and abandoned property program director for the Western New York Law Center in Buffalo, has experience with the “Zombie Law,” as she calls it, in helping communities file suit to encourage compliance.
The nonprofit center, in addition to offering assistance on consumer debt and foreclosure prevention, works with the Erie County Zombies Initiative, a program begun in 2019 by county clerk Michael Kearns to help communities facing zombie foreclosures. (Kearns, once a member of the state Assembly, used to organize “shame campaigns” that planted placards on the lawns of derelict properties in the Buffalo area to embarrass banks holding the mortgages.)
Lockhart characterized the law’s fines as a useful “stick” to “force their [lenders/servicers] hand” on compliance. Maintaining abandoned homes “really is in the bank’s best interest,” she pointed out, because they are assets that can be sold.
Aside from the fine and lawsuit threats, though, Lockhart says communities can “get a lot of compliance just by collaborating” with banks. Few lenders have the expertise to maintain properties, she said, and so have had to bring on property managers and others to accomplish the yard and exterior upkeep required under the Zombie Law.
In the end, it’s “much easier to collaborate” than to sue, she said.
While the pace of residential foreclosures has fallen in the last decade – the state comptroller’s office noted a 46 percent drop in filings between 2013 and 2016 – Lockhart worries what will happen post-COVID.
The pandemic threw many out of work, pushing some local unemployment rates past Great Recession highs. Federal and state moratoriums have halted foreclosures for now, but “when the floodgates open” as COVID-19 is contained, Lockhart fears that more zombies will result.
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected]
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