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State regulations stress banks’ duties for ‘zombie’ homes

Banks and mortgage servicers that don’t maintain vacant and abandoned homes could be fined $500 a day under proposed state regulations.

The Department of Financial Services has outlined regulations that tie into a state law signed by Gov. Andrew M. Cuomo in June.

The goal is to combat “zombie properties,” the vacant, abandoned homes stuck in foreclosure. Housing advocates complain the homes are a blight on neighborhoods, dragging down property values as they fall into disrepair.

The state agency’s regulations aim to hold banks and mortgage servicers accountable for the properties’ conditions.

Within 21 business days of when mortgagees and mortgage loan servicers of a property learn – or should have learned – a property has become vacant and abandoned, they must file forms with contact information for whoever is responsible for maintaining a property, and any foreclosure proceedings.

Banks and mortgage servicers would also have to file quarterly reports detailing their efforts to secure and maintain the properties, and any foreclosure proceedings. Neighbors of zombie homes complain it is often hard to determine who is responsible for properties that slide into disrepair, and that drawn-out foreclosures prevent new owners from buying and fixing up the homes. The regulations also give the Department of Financial Services’ superintendent the authority to hold the bank or mortgage servicer accountable if properties aren’t properly maintained. Violations are subject to civil penalties of $500 a day for a property. The superintendent, Maria T. Vullo, said in a statement the agency “will take necessary and appropriate action to make sure this law is followed and those responsible are held accountable.”

The new law and the proposed regulations exempt banks with a small percentage of mortgage lending or servicing activity in the state.

The New York Bankers Association, which represents banks across the state, said it is reviewing the regulations and wasn’t yet ready to comment on the potential changes. The group will solicit comments from its members to submit to the state agency. The new regulations will be subject to a 45-day notice and comment period after they are published Oct. 12 in the state register.

Assemblyman Michael Kearns, D-Buffalo, praised the state law but opposes exemptions in the regulations that could undercut the new “zombie home” law’s impact.

“We need to address that inventory of vacant and abandoned properties that have been sitting there,” he said.

Kearns estimated there are more than 2,000 vacant and abandoned properties in Erie County.

The state law taking effect Dec. 20 requires banks and mortgage servicers to complete an inspection of a property subject to delinquency within 90 days, and says they must secure and maintain a property in cases where banks and mortgage servicers have a “reasonable basis” to believe the property is vacant and abandoned.


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