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11 lenders OK ‘zombie home’ code for N.Y.

M&T Bank Corp. and 10 other major mortgage lenders have agreed to monitor and maintain vacant properties across the state that are subjects of delinquent loans, as part of an effort to limit or prevent the neighborhood blight caused by abandoned homes.

Under pressure from state leaders, the 11 banks, mortgage servicers and credit unions signed on to a set of “best practices” designed to help state and local governments fight a community scourge known as “zombie homes.”

That refers to properties for which no one takes responsibility because the owners abandoned them in expectation of a foreclosure, but the banks haven’t legally taken possession and aren’t technically required to maintain them.

“Vacant and abandoned buildings are plaguing our cities and towns in the wake of the foreclosure crisis,” said Kirsten E. Keefe, senior attorney at the Empire Justice Center in Rochester. “This is a good first step by the banks to take responsibility for these properties so that cities are not left holding the bag.”

It’s a problem that arose frequently during the financial crisis and subsequent years, especially because of the protracted foreclosure process in New York State, which can sometimes take as long as two to three years to wind through the courts. Once abandoned and neglected, the homes deteriorate, create safety hazards, bring down the appearance and value of surrounding neighborhoods, and create major taxpayer expenses for local governments.

In response, the state Department of Financial Services brought together a group of the country’s largest banks and mortgage companies to agree on a set of procedures.

“The wave of zombie properties that arose in the wake of the financial crisis harms local communities and threatens the long-term health of the mortgage market,” said Superintendent of Financial Services Benjamin M. Lawsky. “These common-sense actions are an immediate and vital part of repairing that damage as we continue to pursue additional legislative reforms. We will work closely with local officials, mortgage companies and other stakeholders to continue addressing the vital problem of zombie properties.”

According to RealtyTrac, about 1 in 4 foreclosures become zombie properties nationwide, including about 19 percent in New York, which has 16,777 such foreclosures.

As part of the agreement with the state, which covers nearly 70 percent of the state’s mortgage market, M&T and the other companies will regularly inspect properties whose loans are delinquent, beginning with an exterior inspection within 60 days of the loan falling delinquent and continuing every 30 days afterward, to determine if they are empty or abandoned.

If so, the lender will secure each unit at abandoned sites by changing the lock, replacing or boarding up windows, eliminating other safety hazards and posting contact information. It will also continue to monitor the condition of the home to ensure that it remains secure and is maintained according to state code.

The companies also will report such properties to the Department of Financial Services, which will compile a registry to be shared with local governments. State and local officials will then work together to raise any concerns about properties with the lenders servicing the loans. The state will also take complaints from neighbors or local officials, and will work with the lenders to resolve any issues.

Besides M&T, the other companies include Wells Fargo & Co., Bank of America Corp., Citigroup’s Citi Mortgage, Ocwen Financial Corp., Nationstar, PHH Mortgage, Green Tree Servicing, Astoria Bank, Bethpage Federal Credit Union on Long Island, and Ridgewood Savings Bank. The agency also plans to continue talks with other banks and mortgage companies to get them to adopt the same practices, which are supposed to be implemented as of August.

“We’ve long recognized the importance of properly maintaining bank-owned houses and have developed a number of processes over the years to ensure we maximize the value of bank-owned houses while also protecting surrounding neighborhood property values,” said Mark J. Mendel, M&T’s senior vice president for customer asset management. “M&T accepts and embraces these New York State best practices, which are consistent with our long-standing approach to maintaining properties.”