New York Attorney General Eric T. Schneiderman and others have made a big push in recent months to pass legislation to prevent so-called "zombie foreclosures," which have become a significant problem in the state.
The Attorney General's Abandoned Property Neighborhood Relief Act was introduced into the Senate earlier this year by Senate Co-Leader Jeff Klein and in the Assembly by Assembly member Helene Weinstein. Since it was introduced, many other New York lawmakers have joined forces with the AG in an attempt to pass the bill.
The bill would require lenders (usually banks) to maintain and pay for upkeep on foreclosed properties that have been abandoned by their owners, and it would also require lenders to notify homeowners that they do not have to move out until the foreclosure process is complete – which could take months or even years.
A "zombie" property is in the process of foreclosure but has been abandoned by the owner but is not yet owned by the bank because the foreclosure process has not been completed. Homeowners often abandon their homes soon after the foreclosure process begins because they are not aware they don't have to leave until a judge declares the process to be complete. In many cases, it is never complete, since not every foreclosure filing results in a complete foreclosure.
Because the property is in limbo, no one is keeping it up, and its condition deteriorates – subjecting the property to all kinds of decay, vandalism, and crime. Zombie properties have a domino effect on the rest of the community, since property values plummet as a result.
"Zombie properties threaten neighborhoods across New York State, from big cities to small towns," Attorney General Schneiderman said in a press release. "Abandoned homes become magnets for crime, drag down property values and drain municipal coffers. Our bill will keep communities safer and lessen the burden of municipalities still struggling to recover from the housing crisis."
The most recent RealtyTrac data (July 2014) indicates that about one in every 1,802 properties in New York is in some state of foreclosure. That number is lower than the national average of one in every 1,203, but foreclosures and particularly zombie properties are still a problem in New York. The number of New York foreclosures is on the rise – RealtyTrac reported that foreclosure filings (starts) in New York increased by 29 percent from June to July and by 12 percent from July 2013 to July 2014. About 15,000 foreclosures in New York are zombie properties, according to RealtyTrac.
In addition to requiring lenders to begin upkeep on properties soon after they are abandoned instead of at the end of the foreclosure process, the bill would also require the lenders to register the abandoned properties in a statewide registry for localities facing abandoned property issues to access electronically. Lenders would be subject to civil penalties for failing to register an abandoned property.
"Abandoned and distressed homes are an eyesore for the community, and have real safety and financial implications for neighboring residents," Bronx council member Ritchie Torres said. "I commend Attorney General Schneiderman and Senator Klein for advancing legislation that places responsibility for these properties where it belongs – with the banks and lenders that put them into foreclosure."