Banks and mortgage firms representing 70% of the New York market will adopt a set of best practices to combat the "zombie properties" afflicting communities throughout the state, New York Gov. Andrew Cuomo announced Monday.
The new measures have been developed and discussed between the New York State Department of Financial Services and the largest banks and mortgage firms in the U.S. — regulated by the DFS or not.
The 11 firms participating in the developing of best practices will conduct exterior inspections of properties to determine if they're vacant within 60 days of delinquency and every 30 days thereafter. If so, the companies will take measures to ensure the abandoned properties are safe, maintained properly and compliant with applicable provisions of the New York maintenance code.
The participating banks, credit unions and mortgage companies adopting the best practices are Wells Fargo, Bank of America, Citi Mortgage, Ocwen, Nationstar, PHH, Green Tree Servicing, Astoria Bank, Bethpage Federal Credit Union, M&T Bank and Ridgewood Savings Bank. The DFS has said it will continue encouraging additional banks and mortgage companies to adopt the proposed best practices.
The best practices will apply to first-lien mortgages on residential homes subject to existing laws, and insurer and investor guidelines. The DFS and participating companies aim to have them fully implemented and adopted by August.
"Today's agreements are a welcome step forward in our fight to stop the epidemic of vacant 'zombie homes,' which have burdened our communities with maintenance costs, lowered property values and crime," Attorney General Eric Schneiderman said in a statement.
Zombie properties are partly the result of a long, drawn-out foreclosure process and made significantly worse by the financial crisis. Property owners are responsible for maintaining their properties, and banks and mortgage companies aren't legally required to assume that responsibility until the properties have been foreclosed — a process that can take three years or longer.
In the space between, the abandoned properties bring down neighborhoods' safety and well-being, create taxpayer expenses and worsen the long-term health of the mortgage market.
The DFS will develop a state registry to which the participating bank and mortgage firms will have to report zombie properties. These reports will be shared with government officials and the DFS will work with them to address maintenance concerns with the company servicing the loan. It will also accept complaints from neighbors and local officials about properties.
