ALBANY, N.Y. – New York imposed new requirements Thursday on mortgage lenders to maintain abandoned houses before foreclosure.
The law signed by Gov. Andrew Cuomo threatens banks with civil penalties up to $500 a day for failing to maintain residential properties once they’re aware of vacancies.
The old law required they take responsibility following foreclosure judgments. Cuomo said that has left hundreds of “zombie properties” across the state.
“The banks have to step up and recognize their responsibility, and if they don’t do it they’re going to be fined,” Cuomo told a gathering of officials and press in front of a vacant house in suburban Syracuse.
“And if they don’t do it the local government can step in and do it or the state can step in to do it, and they’re going to get the bill,” he said. “Because I’m tired of having homeowners pay for the profits of banks.”
The problem is a legacy of the 2007-2008 mortgage crisis that left many homeowners with high mortgage payments and dropping home values when the U.S. real estate bubble burst, Cuomo said.
“This is when the banks, frankly, in my opinion committed mortgage fraud on this nation and did mortgages for people who couldn’t handle it on a theory that real estate was going to continually increase ad infinitum.”
The new law also establishes an electronic statewide registry of abandoned homes and a state hotline where neighbours can report them, and requires notices to mortgage borrowers emphasizing their right to stay in houses until foreclosure.
A related measure establishes a State of New York Mortgage Agency fund to buy and sell abandoned properties at below-market rates and demolish those beyond repair.
The state comptroller reported last year that the foreclosure crisis persists in New York, even worsening in some suburban and upstate areas. In 2014, 43,868 new cases were filed.
“When they allow an abandoned property like this to remain abandoned, it does not just devalue this property, it devalues properties next to it and then the entire community,” Cuomo said. “New York happens to have one of the highest concentrations of abandoned homes, depending on whose estimate you pick.”
The Mortgage Bankers Association of New York had urged its members to contact their state senators to oppose the legislation. “If passed, the bill would require lenders/servicers to maintain properties once they are vacant and abandoned, regardless of the fact that the lender/servicer has no ownership in the property and is in store for a foreclosure process that will take at least 3 years,” association President Frederick McDonald wrote.
Calls to the association Thursday were not immediately returned.
The law establishes a method for requesting expedited foreclosures of vacant properties homeowners no longer want, according to the governor’s office. It also requires auctioning the property within 90 days of a foreclosure judgment.