The Town of Clarence is suing banking giant U.S. Bancorp of Minneapolis and national mortgage servicing company Mr. Cooper over their failure to maintain a vacant Shisler Road home, allowing it to become a "zombie property" that threatens to drag down the surrounding neighborhood.
The lawsuit, filed by the Western New York Law Center on behalf of the town, marks the first suit filed as part of Erie County's ZOMBIES Initiative.
That's an effort which was launched in June 2019 by County Clerk Michael P. Kearns – who has focused on the issue since he was in the state Assembly – in response to a growing problem of abandoned homes in various stages of foreclosure. The goal is to embarrass and pressure mortgage companies to take responsibility for properties on which they have initiated foreclosure, ensuring they are properly maintained and do not deteriorate.
The legal foreclosure process in New York can drag on for many months before a lender finally takes possession of a house following a mortgage default. But many homeowners simply pack up and leave after getting the first foreclosure notices, not realizing that they are still the legal owners and can still fight the foreclosure. As a result, the home is sometimes left vacant and neglected.
State law now requires that lenders inspect, secure and maintain such properties after they start foreclosure proceedings, and allows municipalities to sue lenders that allow deterioration to occur. In this case, Clarence and the Law Center allege that Mr. Cooper and U.S. Bank failed to maintain a four-bedroom house at 4765 Shisler Road that has been the subject of growing concern.
"In these very difficult times it is essential that banks and servicers be held accountable and that our neighborhoods are preserved," Kearns said Friday.
The 2,812-square-foot Clarence property has been in foreclosure since 2012, although it only became abandoned two years ago. Since then, according to the town, the power and gas service were shut off, the basement flooded, the windows have been broken, the garage collapsed, animals have gotten in, and the foundation has been damaged.
The ZOMBIES Initiative and Law Center learned of the problems in the fall of 2019, after Clarence Code Enforcement Officer David Albert notified them. The Law Center filed a complaint with the state Department of Financial Services in October of last year, triggering conversations with the prior mortgage servicer, which then transferred the servicing to Mr. Cooper – the business name of Nationstar Mortgage – in December 2019.
The Law Center sent "numerous letters" to Mr. Cooper to seek compliance with the law, but "they have not made a meaningful effort to do so," according to the ZOMBIES Initiative. Meanwhile, the loan was added in May 2020 to a Wall Street investment security administered by U.S. Bank.
“The ZOMBIES Initiative’s goal for each property we encounter is to keep our communities safe,” said Kate Lockhart, director of the Vacant and Abandoned Properties Program at the Western New York Law Center. “The Town of Clarence gave Mr. Cooper many opportunities to bring this property into compliance. This suit is the result of months of neglect by Mr. Cooper and our goal is to ensure that this property gets addressed and Mr. Cooper pays fines for their non-compliance with New York State law.”
The lawsuit, filed in Erie County Supreme Court, is seeking a civil penalty of $500 for each day that a code violation existed on the property, starting in December 2019 when Mr. Cooper began servicing the loan. That's a total of $75,000, on a home estimated to be worth less than $170,000 by Trulia and Zillow.
"Hopefully, because of this suit, the present mortgage servicer will expedite the foreclosure, transfer the home to a new responsible owner, and pay damages to the taxpayers of the Town of Clarence,” said Clarence Supervisor Patrick Casilio.