Eleven major mortgage lenders agreed Monday to maintain and monitor vacant properties in the state of New York where the loans are delinquent and the homes are abandoned - otherwise referred to as zombie properties.
Wells Fargo & Co., Bank of America Corp., Citigroups Citi Mortgage, Ocwen Financial Corp., M&T Bank Corp., Nationstar, PHH Mortgage, Green Tree Servicing, Astoria Bank, Bethpage Federal Credit Union on Long Island and Ridgewood Savings Bank signed on to a set of best practices designed to help state and local governments prevent blight caused by abandoned homes.
The agreements come after state officials pressured the lending community to get involved in helping fix the problem.
New York Attorney General Eric T. Schneiderman announced this month the introduction of a newly expanded Abandoned Property Neighborhood Relief Act, aimed at curbing the number of zombie homes. The bill requires banks and mortgage servicers to maintain vacant and abandoned residential properties during the foreclosure process. Banks that fail to do so will be forced to pay penalties that local governments can then use to enhance their enforcement efforts under the Act.
Zombie properties specifically refers to those that nobody is taking responsibility for because the owners left them in expectation of a foreclosure, but the banks havent legally taken possession and arent technically required to maintain them.
As part of the agreement with state officials, which covers nearly 70% of the states mortgage market, the lenders will regularly inspect properties where the loans are delinquent, starting with an exterior inspection within 60 days of the loan falling delinquent and continuing every 30 days afterward, to determine if they are empty or abandoned.
If they are, the lenders will secure each unit at abandoned sites by changing the lock, replacing or boarding up windows, eliminating other safety hazards and posting contact information. They also will continue to monitor the condition of the homes to make sure they remain secure and are maintained according to state code.
The companies will report abandoned properties to the state's Department of Financial Services, which will compile a list to be shared with local governments. State and local officials will work together to raise any concerns about properties with the lenders servicing the loans. The state also will take complaints from neighbors or local officials and will work with the lenders to resolve any issues.
"The wave of zombie properties that arose in the wake of the financial crisis harms local communities and threatens the long-term health of the mortgage market, said New York Superintendent of Financial Services Benjamin M. Lawsky. "These common-sense actions are an immediate and vital part of repairing that damage as we continue to pursue additional legislative reforms. We will work closely with local officials, mortgage companies and other stakeholders to continue addressing the vital problem of zombie properties."
An estimated 25% of foreclosures become zombie properties nationwide, including about 19% in New York, which has 16,777 such foreclosures, according to RealtyTrac.