New York providing grants to boost zombie property law compliance

New York State is providing additional funding to municipalities that will boost efforts regarding mortgage servicer compliance with the state and local vacant property laws.

The program called Zombies 2.0 will provide up to $9 million in grants, which will also be used to increase housing code enforcement and track and monitor vacant properties.

"Far too many communities throughout New York continue to be blighted by zombie homes," said Attorney General Letitia James in a press release. "These abandoned houses significantly decrease property values and threaten the safety of surrounding neighborhoods. Zombies 2.0 will be a key resource for cities and town across the state to combat this nuisance, and make communities whole."

It is a continuation of a 2016 program established by then-Attorney General Eric Schneiderman, the Zombie Remediation and Prevention Initiative, that provided $13 million in grants to 76 New York municipalities, which among other things, was used to increase local code enforcement capacity to hold lienholders accountable for zombie properties. Under a New York law passed that year, mortgagees must externally maintain vacant one-to-four family homes during the foreclosure process or face a penalty of up to $500 per day.

PHH Mortgage was the first servicer fined under that law, $119,000, by the state's Department of Financial Services in December 2017 for failing to maintain a property in New Lebanon, N.Y. The servicer allegedly did not maintain the property for at least 238 days after it was placed on the DFS registry.

Funding for Zombies 2.0 is a result of Schneiderman's $500 million settlement with Royal Bank of Scotland in 2018 over the bank's residential mortgage-backed securities sales practices.

"Zombie properties leave an undue burden on the communities that surround them," said Assemblymember Pamela Hunter, a Democrat who represents the Syracuse area. "Neglected properties that fall into disrepair because of absentee banks attract crime and lower the property values of surrounding homes. The program announced today will give municipalities and homeowners the resources they need to mitigate blight and put communities back on track."

The Local Initiatives Support Corp. is managing the Zombies 2.0 program. It will award grants in amounts ranging from $50,000 to $500,000 based on the scale and severity of the eligible municipalities' zombie and other vacant one-to-four family house problems.