Governor Andrew M. Cuomo recently announced that 11 banks, mortgage companies, and credit unions representing nearly 70 percent of the New York market will adopt a set of best practices to help combat the neighborhood blight and economic damage caused by vacant and abandoned “zombie properties” in New York State. Under these best practices, the banks and mortgage companies will regularly inspect properties that fall into delinquency to determine if they are vacant and abandoned, and make sure that those properties are safe and properly maintained, among other measures. The banks and mortgage companies will also report properties determined to be vacant and abandoned to a state registry to be developed by the New York State Department of Financial Services, which will share that information with local government officials. The Department will work with those local officials to address and escalate any concerns about maintenance with the bank or mortgage company that is servicing the loan.

"Zombie properties can bring down the economic health and safety of entire neighborhoods – but by working together we are taking steps to help strengthen and repair local communities," said Governor Cuomo. "We commend these companies for working with us to address this problem. This action is a win-win that will benefit communities and mortgage owners across the state, and should serve as a model for protecting neighborhoods from the dangers of vacant and abandoned properties in the future."

Benjamin M. Lawsky, Superintendent of Financial Services, said: “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. 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.”

“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,” said Attorney General Eric T. Schneiderman. “I will continue to work with my colleagues in government across the State to pass our Abandoned Property Neighborhood Relief Act, a legislative solution that will codify today’s reforms into law, provide meaningful enforcement, and give municipalities the resources to take back their streets. I applaud Superintendent Lawsky for moving the ball forward on this crucial issue.”

Darryl C. Towns, Commissioner/CEO of New York State Homes & Community Renewal, said: "Homeowners have to be good neighbors and banks have to be good neighbors. This effort to support neighborhoods and strengthen communities is another way to preserve regional integrity and serves as an abatement to blight. Ensuring the safety and well-being of New Yorkers and helping maintain foreclosed homes is a priority for the state. Working together, we can restore stability and security to neighborhoods."

Vacant and abandoned properties are a significant problem throughout New York State, causing blight and safety hazards, and creating significant taxpayer expenses for local communities. This issue is exacerbated by a protracted foreclosure process and the damage caused by the financial crisis. Under existing law, property owners are responsible for the maintenance of their properties and, thus, banks and mortgage companies are not required to maintain vacant and abandoned properties until they receive a judgment of foreclosure, often three years or more after filing for foreclosure. During this limbo period, some properties may fall into disrepair, and worsen blight and safety issues.

NYDFS convened a group of the nation’s largest banks and mortgage companies – both those it regulates and those it does not – to help address this problem. Among the protections provided by the best practices announced today, banks and mortgage companies will conduct an exterior inspection of a property within 60 days of delinquency to determine vacancy and abandonment, and then every 30 days thereafter. If the property is determined to be vacant and abandoned, the bank or mortgage company will secure each unit at the property by changing the lock, replacing or boarding up windows, posting the property with contact information, and eliminating other safety hazards. Then, on an ongoing basis, the bank or mortgage company will monitor the property’s condition to ensure it remains secure and that it complies with applicable provisions of the New York maintenance code (e.g. the grass must be cut, and conditions at the property must be safe and sanitary). The best practices are applicable to first-lien mortgages on residential homes and subject to existing laws, and insurer and investor guidelines.

Kirsten Keefe, Senior Attorney at the Empire Justice Center, said: "Vacant and abandoned buildings are plaguing our cities and towns in the wake of the foreclosure crisis. We commend the Governor for recognizing this problem and devoting resources to resolving the issue. This is a good first step by the banks to take responsibility for these properties so that cities are not left holding the bag."

After these best practices are adopted and the registry has been created by NYDFS, participating banks and mortgage companies will notify NYDFS of any new properties they have determined to be vacant and abandoned and NYDFS will share this information with local officials across the state. NYDFS will accept complaints from neighbors or local officials about the properties. The Mortgage Assistance Unit of DFS, which works regularly with banks and mortgage companies to address mortgage-related issues affecting New Yorkers, will work with the applicable bank or mortgage company to resolve issues raised in any such complaint. Complaints can be submitted to NYDFS at http://www.dfs.ny.gov/consumer/fileacomplaint.htm.

The banks, credit unions, and mortgage companies that are adopting these best practices, which represent nearly 70 percent of the New York market, are:

• Wells Fargo
• Bank of America
• Citi Mortgage
• Ocwen
• Nationstar
• PHH
• Green Tree Servicing
• Astoria Bank
• Bethpage Federal Credit Union
• M&T Bank
• Ridgewood Savings Bank

NYDFS will continue discussions in the days and weeks ahead with additional banks and mortgage companies encouraging them to adopt these industry best practices. The best practices are targeted to be implemented and adopted by August 2015.

To a view a copy of the best practices the banks and mortgage companies will implement, please click here.