Industry Best Practices Will Help to Curb Blight, Reduce Taxpayer Costs, and Shore up Property Values
13 Mortgage Companies Representing Approximately 70 Percent of the NY Market Have Now Agreed to Adopt Zombie Property Best Practices
Governor Cuomo announced 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 today’s 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 abandoned properties do not fall into disrepair not only protects neighborhoods from blight, but also shields homeowners from having to contend with the falling property values, public safety issues and increased taxpayer costs associated with having these zombie properties in their community," Governor Cuomo said. "I applaud these two mortgage companies for standing with us to protect the American Dream for New Yorkers all across this state."
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.
Anthony J. Albanese, Acting Superintendent of Financial Services, said, “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. 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.”
Scott Fisher, First Niagara Senior Vice President, Managing Director, Retail Channels, said, “At First Niagara, we strive to do what’s in the best interest of our customers and our communities. While we historically have had a low incidence of foreclosures, we fully support efforts to develop industry best practices to help combat the blight and economic damage caused by vacant properties. We are proud to support this newly developed, collaborative approach to taking care of the communities where we all live, work and raise our families.”
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 Mortgage Assistance Unit, which works regularly with banks and mortgage companies to address mortgage-related issues affecting New Yorkers, will work with the applicable bank or mortgage company to resolve issues raised in any such complaint. Complaints can be submitted at http://www.dfs.ny.gov/consumer/fileacomplaint.htm
The banks, credit unions, and mortgage companies that are adopting these best practices, which represent approximately 70 percent of the New York market, are:
- Carrington Mortgage
- First Niagara
- Wells Fargo
- Bank of America
- Citi Mortgage
- Green Tree Servicing
- Astoria Bank
- Bethpage Federal Credit Union
- M&T Bank
- Ridgewood Savings Bank
The Department of Financial Services will continue discussions in the days and weeks ahead with additional banks and mortgage companies encouraging them to adopt these industry best practices. The best practices are targeted to be implemented and adopted by August 2015.
To a view a copy of the best practices the banks and mortgage companies will implement, please click here.