A.G. Schneiderman to submit expanded legislation to address growing problem of 'zombie properties'

Schneiderman: With 50 percent more 'zombie properties' statewide, we must solve the vacant and abandoned property crisis

Attorney General Eric T. Schneiderman announced that, in the next two weeks, he will resubmit to the Legislature an expanded version of a bill he proposed last year to address the growing statewide problem of so-called "zombie properties" - vacant and abandoned homes that are not maintained during a prolonged foreclosure proceeding. The attorney general's program bill, the Abandoned Property Neighborhood Relief Act, aims to reduce the number of vacant and abandoned properties falling into disrepair across the state by informing homeowners of their right to stay in their home until a court orders the homeowner to leave, requiring mortgage lenders and servicers to identify, secure and maintain vacant and abandoned properties much earlier in the foreclosure process, and creating a registry of such properties to assist municipalities with enforcement of laws regarding property maintenance.

In a new provision, any fines levied against banks and other lenders for noncompliance with the law would be directed to a fund for local governments to hire additional code enforcement officers. Independent Democratic Conference Leader and Senate Coalition Co-Leader Jeffrey D. Klein and Assembly Member Helene Weinstein are expected to sponsor the legislation. Schneiderman announced the bill in a speech before the New York State Association of Towns' 2015 Training School and Annual Meeting.

"Leaving 'zombie properties' to rot is unfair to municipalities and unfair to neighbors, who pay their taxes and maintain their homes," Schneiderman said. "In the next two weeks, my office will resubmit to the Legislature our bill that would require banks to take responsibility for maintaining properties much earlier in the foreclosure process, take that burden off of towns and cities, and allow local governments to more easily identify the mortgagees of these properties to make sure they maintain them. And as my office enforces the requirement that banks take responsibility for these properties, any fines we levy will go into a fund to help towns and cities hire more code enforcement officers."

In his remarks, Schneiderman noted the problem of "zombie properties" has gotten worse in New York in the past year. His office analyzed 2014 data and found "zombie" foreclosures increased almost 50 percent in 2014 compared to 2013. There were roughly 16,700 "zombie" foreclosures across the state last year. The top 10 counties with the most "zombie" properties stretch from Long Island, to New York City, through the Hudson Valley to Western New York. The regions with the largest share of "zombie" foreclosures are the North Country and Central New York. In those areas, 42 percent of properties in foreclosure are abandoned before the foreclosure process is complete.

The attorney general's Abandoned Property Neighborhood Relief Act would address the problem of "zombie properties" in several ways. Too often, he said, when a homeowner falls behind on mortgage payments and receives a notice of arrears or a foreclosure notice, the homeowner abandons the property. Many families may not understand they have the right to remain in their home until a judge declares the foreclosure complete. The bill requires homeowners be provided with early notice that they are legally entitled to remain in their homes until ordered to leave by a court.

At the same time, there is evidence that lenders are actually slowing down the foreclosure process and, in some cases, seeking to discontinue the foreclosure action in the middle of the process, leaving homes in a "zombie" state of being vacant, abandoned and not maintained. To address this problem, Schneiderman's bill requires mortgagees and their loan servicers and agents to identify, secure and maintain vacant and abandoned properties soon after they are abandoned - not, as under current law, at the end of a lengthy foreclosure process.

The bill establishes a periodic inspection requirement for mortgagees and loan servicing agents to determine if property subject to a delinquent mortgage is currently occupied. The bill also makes it unlawful for a mortgagee or loan servicing agent, or a person acting on their behalf, to enter a property that is not vacant or abandoned for the purpose of intimidating, harassing or coercing a lawful occupant in order to induce them to vacate the property, thereby rendering it vacant and abandoned.

"Zombie" homes also burden municipalities, Schneiderman said. With no one maintaining these derelict properties, they become vulnerable to crime, decay, vandalism and arson. Furthermore, these "zombie" homes decrease the property value of neighboring homes and become a burden for local code enforcement and emergency service providers.

To help municipalities address these problems, the bill requires mortgagees or their agents to electronically register these properties with a newly created statewide vacant and abandoned property registry to be established and maintained by the attorney general. The registry, in turn, will provide a much-needed and readily available source of information on vacant and abandoned residential properties to local officials throughout the state, and will be supplemented by a toll-free hotline community residents can use to report suspected vacant and abandoned properties to the attorney general and receive information regarding the status of registered properties, including the identity of the mortgagee or agent responsible for maintaining them. The bill also would create a fund to hire local code enforcement officers, and direct any fines levied for violations of the law into that fund.

"The ripple effects of abandoned properties due to foreclosure continue - year after year property values plummet and our once quiet and family-friendly neighborhoods are now becoming hotbeds for criminal activity," Klein said. "More than six years ago, Assemblywoman Weinstein and then State Sen. Schneiderman and I worked together to pass legislation requiring that financial institutions maintain properties upon foreclosure. Attorney General Schneiderman's legislation is the next vital step in holding banks accountable for these 'zombie properties' in our communities and providing the needed financial assistance to the localities that are forced to maintain these eyesores. This bill will ensure we not only keep our communities safe, but our neighborhoods beautiful and strong."

"In too many neighborhoods across New York state, lenders have permitted vacant and abandoned residential properties to fall into disrepair," Weinstein said. "These properties are a blight on neighborhoods and bring down the property values in communities. I look forward to working with New York state Attorney General Eric Schneiderman to help protect our neighborhoods by identifying and ensuring maintenance of properties early on."

Buffalo Mayor Byron W. Brown said, "Banks and lending institutions that allow their properties to fall into disrepair and become blighted are bad neighbors and will not be tolerated in Buffalo. This proposal will require banks to maintain a property if it becomes vacant after the start of a foreclosure proceeding. This will be an important tool to maintain our city residents' quality of life and ensure stable residential neighborhoods throughout the city at a time when Buffalo is experiencing tremendous new investment and job growth. I applaud Attorney General Eric T. Schneiderman for leading the charge on this important issue."

Niagara Falls Mayor Paul Dyster said, "Any city like Niagara Falls that has suffered substantial population loss is going to have vacant properties. Often times, banks will start a foreclosure process, but then not complete it, because they don't want to have responsibility for taking care of that property. That's just not fair, because the home then becomes the city's problem. I commend Attorney General Eric Schneiderman for introducing legislation that will create a statewide registry of foreclosed properties and track those that are in the process. I'm confident that enacting legislation like this will improve the overall quality of our neighborhoods."

New York Conference of Mayors Executive Director Peter A. Baynes said, "The New York State Conference of Mayors applauds Attorney General Schneiderman's continuing efforts to address the growing problem of 'zombie properties,' which plague communities across the state. Vacant and abandoned properties blight communities, create nuisance conditions, depress the value of neighboring properties and create serious public safety issues. Attorney General Schneiderman already has a well-established track record as an ally of local governments in addressing these issues. His support for the expansion of New York's land bank program and his providing much-needed financing of land bank activities is invaluable. In addition, his efforts in creating a 'zombie property' hotline will prove to be a much-needed conduit of communication between the mortgage lenders and the communities affected by properties in the foreclosure process. Now, the attorney general's Abandoned Property Neighborhood Relief Act will give local officials and their communities the tools to effectively deal with the 'zombie properties' that are threatening the vitality of New York's cities and villages."

Schneiderman's Abandoned Property Neighborhood Relief Act is one component of his broad strategy to help New York homeowners and communities recover from the foreclosure crisis. He successfully fought for a strong national mortgage settlement that delivered more than $2 billion in relief to financially struggling New York families. He dedicated $100 million from the national mortgage settlement to create the Homeowner Protection Program, or HOPP, a program to fund free foreclosure prevention legal services and housing counseling across the state. Through December 2014, the HOPP program helped approximately 39,000 families statewide. He has committed $33 million to fund land banks, not-for-profit organizations that help municipalities to buy up vacant and abandoned properties and either rehabilitate them or tear them down so the land can be put to productive use. The attorney general also proposed legislation, which was enacted into law last year, increasing the maximum allowable number of land banks in the state from 10 to 20.

Homeowners who need assistance are encouraged to call the attorney general's statewide foreclosure hotline at 855-HOME-456 and visit www.AGHomeHelp.com to connect with HOPP organizations and agencies in their area that can provide foreclosure prevention services.