Local municipalities in the areas hit hardest by the foreclosure crisis have made various attempts through legislation to combat the problem of “zombie properties,” or vacant and abandoned properties in the process of foreclosure.
While the number of zombie properties has been on the decline—the most recent data reported by RealtyTrac showed 1.4 million vacant properties nationwide, with about 19,000 of those properties in active foreclosure—the question of whose responsibility it is to maintain those properties has been a major sticking point between servicers and lawmakers. The longer the properties remain vacant, the more potential they have to become magnets for squatters, vandalism, and violent crime, bringing down property values and lowering the quality of life in their surrounding communities.
Hempstead Town, New York—population 800,000, making it the largest municipality designated as a town in the United States—is proposing a solution to the problem in order to combat the zombie property problem: Hold banks and servicers responsible. Town Supervisor Anthony Santino has proposed a law that would require the servicer of the mortgage provide a $25,000 “security fund” (either by cash, cash bond, or letter of credit) to maintain vacant and abandoned properties that are in the process of foreclosure in compliance with the Hempstead Town Code.
“It’s time for big banks and other financial institutions to ‘do the right thing’ when it comes to ensuring that properties which they have seized don’t become a blight on local neighborhoods,” Santino said. “It’s unacceptable for banks to make big profits on home mortgages and then turn their backs on neighbors by failing to maintain these same properties once they foreclose on them. That’s why I have come up with a plan that puts lenders ‘on the hook,’ ensuring that they put up ‘security funding’ to guarantee property upkeep of vacant homes.”
“It’s time for big banks and other financial institutions to ‘do the right thing’ when it comes to ensuring that properties which they have seized don’t become a blight on local neighborhoods.”
Anthony Santino, Hempstead Town Supervisor
Santino said the money would be used to provide maintenance such as lawn care, removal of debris, securing of properties by boarding up windows and doors, graffiti removal, and covering pools, among other items, in the event that “the lender fails in its responsibility to maintain the home.”
Santino’s plan for maintaining zombie properties calls for the servicer to provide $25,000 for each foreclosure initiated and also includes provisions to replenish the security fund as money from the fund is used or depleted, in order to continuously maintain the properties. The proposal from Santino also calls for penalties of up to $1,500 per day for lenders to fail to provide the $25,000 security fund under the proposed law, a Santino spokesperson told DS News.
The legislation will be heard by the Hempstead Town Board on Tuesday, May 24, beginning at 10:30 a.m. EST.