New York's State Assembly has passed legislation that seeks to address problems related to preforeclosure vacant and abandoned properties.
The bill, titled the New York State Abandoned Property Relief Act of 2016, passed on a 116-22 vote May 24. The legislation was drafted in coordination with New York State Attorney General Eric Schneiderman and was sponsored by Assemblymember Helene Weinstein.
The bill would expand lenders' and servicers' existing duties to maintain vacant residential properties before they enter into foreclosure. The bill also would require periodic inspections to determine whether delinquent properties have been vacated or abandoned.
Also as part of the bill, the attorney general's office would be charged with creating and supervising a statewide registry for abandoned residential property and a toll-free hotline for residents to report the existence of such properties. The attorney general also must notify Fannie Mae and Freddie Mac when properties are added to the registry.
The legislation also aims to address the frequency with which homeowners vacate properties before they need to by requiring lenders and servicers to provide written notification to borrowers when they fall three months delinquent that they can remain on the property until ordered to leave by a court.
A similar bill is currently in committee in the New York State Senate in the Upper Chamber of the State's Legislature. Already though, industry leaders have begun to sound the alarms over the potential ill effects the legislation would have if it became law.
"Lenders doing business in the state of New York should be very concerned about this legislation," Zahras Jafri, president of the Empire State Mortgage Bankers Association, said in a written statement Friday. "It is very probable that many lenders will leave the state, due to the legal risk and financial burden that will be placed on them when properties become vacant and abandoned."
The legislation comes on the heels of an agreement between New York Gov. Andrew Cuomo and 11 banks, mortgage companies and credit unions in May 2015 to adopt a set of best practices related to combating the adverse effects these vacant and abandoned, or zombie, properties have on neighborhoods and housing markets.
Similarly, localities across the state have taken matters into their own hands. The town council in Hempstead, a town located on Long Island, unanimously approved a measure that would require banks and lenders to put down a $25,000 deposit when properties go into foreclosure to pay for their maintenance, Long Island-based publication Newsday reported. That town law was voted on the same day as the Assembly vote.
The Assembly's legislation included provisions to create a division of the State Supreme Court devoted to foreclosure actions on vacant and abandoned properties.
In general, the foreclosure process in New York is one of the longest in the country. On average, a foreclosure takes 1,061 days to go from the first public notice to being complete, according to data from RealtyTrac for the first quarter of 2016. The nationwide average is 625 — New York only falls behind Hawaii and New Jersey for its foreclosure timeline.
