“Zombie properties” are vacant homes whose owners – underwater on their mortgages – abandon their properties. The keys get turned over to the bank holding the mortgage, but most banks don’t want to put money into properties before they are resold.
That gray area, in which no one takes ownership of the property, is what gives rise to zombie homes, the scourge of many a neighborhood.
An increasing number of cities and towns, emboldened by a two-year-old state law, are using violation notices and lawsuits against financial institutions to make them act faster in getting the homes fixed up and sold.
This is how legislation should work in protecting property owners: Give banks a financial incentive – in this case a negative one – to do what they should be doing.
The legal challenges are getting results, a Buffalo News story showed this week. The Town of Tonawanda settled three of 10 lawsuits it filed against zombie home lenders, winning $52,000 in awards.
Erie and Niagara counties combined have 1,464 zombie homes, according to the state Department of Financial Services.
The Town of Tonawanda said it has reduced its number of zombie homes from 250 in 2017 to about 40.
Amherst also has about 40. A town official said Amherst has gotten banks to act by threatening the worst homes with demolition, and has torn down five so far.
That’s fewer homes with unkempt yards, falling shingles and that are invitations to drug addicts or potential criminals.
Erie County Clerk Michael P. Kearns told The News that foreclosures, which reached 2,759 during the housing crisis in 2009, fell to 1,668 in 2017 and 1,445 this year. Zombie homes have been a target of Kearns since he was on the Buffalo Common Council, and he advocated zombie home legislation while serving in the Assembly.
Signed into law by Gov. Andrew M. Cuomo in 2016, the legislation requires lending institutions to report zombie homes to the state registry and subjects them to fines of $500 per day for failing to properly maintain the homes.
Since then, the state has filed 14 enforcement actions and penalized companies $258,675 for violations, and sent out 2,000 letters to banks and mortgage holders advising them to repair or maintain their properties.
The legal actions taken by municipalities are getting results. The City of Niagara Falls in 2017 sued Citizens Bank over properties that weren’t kept up to city code. The city and the bank settled this year, with Citizens Bank agreeing to foreclose on homes in Niagara Falls much faster.
The Town of Tonawanda filed 10 lawsuits in State Supreme Court this past spring, and it recently approved settlements over three zombie properties with CitiMortgage, Ocwen Financial Corp. and PHH Mortgage/HSBC Bank USA.
The Western New York Law Center is preparing lawsuits on behalf of Cheektowaga and West Seneca, according to Kate Lockhart, the law center’s foreclosure data manager.
Lockhart also pointed out that property owners, upon receiving a foreclosure notice, should stay in their homes. They can often work out terms with their lending institution that will hold off foreclosure. Agencies such as the Western New York Law Center, Belmont Housing Resources and Buffalo Urban League can provide guidance.
Cities, towns, individuals and banks all have a stake in reducing the number of homes that turn into eyesores and drive down a neighborhood's property values. This useful law has helped to drive home that fact.