Comprehensive Legislative Package Enhances Mandatory Settlement Conferences and Establishes a Consumer Bill of Rights to Help People Remain in Their Homes, Creates the Community Restoration Fund
Combats Blight Created By Zombie Properties By Imposing a Pre-Foreclosure Duty on Banks and Servicers to Maintain Zombie Homes, Creating an Electronic Registry of Abandoned Properties, and Expediting Foreclosure For Vacant and Abandoned Properties to Get Them Back on the Market
Governor Andrew M. Cuomo today signed legislation to prevent foreclosures and curb the threat posed to communities by “zombie properties.” The bill was passed as part of the 2016 Legislative Session and is a boon for the economic health and public safety of communities and homeowners who would otherwise be at risk of losing their residences. The legislation combats the blight of vacant and abandoned properties by expediting the rehabilitation, repair and improvement of these properties, and enabling the State to assist homeowners facing mortgage foreclosure. The Governor signed the legislation into law, touring the state and visiting affected communities, at events in Syracuse, Manhattan and Long Island.
“For many New Yorkers, homes are our single most important investment, but that investment can be undermined by the blight of neglected and abandoned properties,”Governor Cuomo said. “For each zombie home that we cure and for each that we prevent with this legislation, we are saving entire neighborhoods from the corrosive effect of blight and neglect. I thank my colleagues in the Assembly and Senate for seeing a crisis and helping to turn it into an opportunity for people to realize the great American Dream of homeownership.”
Attorney General Eric T. Schneiderman said: “This law is major victory for New Yorkers living in communities throughout the state, as it will give regulators and law enforcement the tools they need to revitalize neighborhoods that have been devastated by the proliferation of zombie homes. I applaud Assembly Member Weinstein and Senator Klein for their unwavering commitment to revitalizing communities plagued by zombie homes by working with Governor Cuomo to craft an impressive and meaningful legislative package. I also commend Governor Cuomo for making this issue a priority this session and by acting swiftly to sign this bill into law. As I have long said, zombie homes are an enduring legacy of the housing crisis, but thanks to the advocacy of determined elected officials and advocates, and thousands of motivated New Yorkers, we now have a law that will lift-up communities statewide.”
Senate Majority Leader John J. Flanagan said: “Working together, we have passed a responsible measure to address the abandoned and decaying homes in many of our communities known as ‘zombie properties. By doing so, we will reverse blight, protect property values and strengthen our economy for the future. I thank Governor Cuomo and our colleagues in the Legislature, especially Senator Jeff Klein, who as leader of the Independent Democratic Conference and our majority coalition partner, focused on this issue like a laser until we achieved a positive result for the people of New York.”
Assembly Speaker Carl Heastie said: “While our economy has taken strong and sure steps toward full recovery, high foreclosure rates continue to affect New Yorkers around the state. It is critical that we do all we can to help people remain in their homes and keep neighborhoods safe. This agreement will provide the assurance of stronger protections against predatory foreclosure practices, a more expedient process for transitioning these properties to help communities move past foreclosure, and toward opportunities for home ownership.”
The legislation includes measures to assist homeowners facing mortgage foreclosure, improve the efficiency and integrity of the mandatory settlement conferences, establish a pre-foreclosure duty to maintain on mortgagees, create an expedited foreclosure process for vacant and abandoned properties, create an electronic vacant property registry, and establish a Consumer Bill of Rights. Specifically, the legislation will:
STRENGTHEN HOME FORECLOSURE PREVENTION SERVICES
- Enhance the Effectiveness of Mandatory Settlement Conferences: The mandatory settlement conferences became law in 2010 to slow foreclosure and give homeowners a better chance to fight the foreclosure. Since its creation, the number of foreclosure default judgments has declined from 80% to less than 20%. This legislation will enhance the effectiveness of settlement conferences even further for homeowners by prescribing the rights and duties of the parties and clarifying how the process should work to best protect homeowners contesting foreclosures and prevent them from losing their homes.
- Establish a Consumer Bill of Rights informing property owners of their rights in foreclosure proceeds to prevent people from losing their homes: Some homeowners vacate their homes early in the foreclosure process because they are unclear about their rights or face pressure to vacate. The enhanced notice requirements established with this legislation will alleviate this confusion and reduce the resulting abandoned properties by explicitly informing homeowners of their rights
- Create the Community Restoration Fund (CRF), a new tool for the State of New York Mortgage Agency (SONYMA) to assist homeowners facing mortgage foreclosure. CRF will purchase defaulted mortgage notes from other lenders and offer favorable mortgage modifications to keep homeowners in their residences. CRF will have the ability to forgive a portion of a loan’s principal and make the loan affordable in areas where home values have declined or where a homeowner has experienced a decrease in income.
COMBAT THE BLIGHT CREATED BY VACANT AND ABANDONED PROPERTIES
- Impose a pre-foreclosure duty on the banks and servicers to maintain vacant and abandoned properties: Previously, a bank or mortgagee had the responsibility of maintaining a vacant property once a judgment of foreclosure and sale was obtained, creating zombie properties and blight in communities. This legislation places the maintenance obligation on a mortgagee when the mortgagee becomes or should have become aware of the vacancy. Under this law, the bank has a duty to maintain and secure a residential real property where there is a reasonable basis to believe it is vacant and abandoned, and faces civil penalties up to $500 per violation, per property, per day for failing to do so.
- Expedite foreclosure for vacant and abandoned properties: The legislation offers plaintiffs an option for an expedited foreclosure process on bonafide vacant and abandoned properties that homeowners no longer want. To initiate this process, plaintiffs would make an application for an order to show cause upon notice seeking entry of judgment of foreclosure and sale on the grounds that the property is vacant and abandoned.
The legislation requires a foreclosing party to move to auction within 90 days of obtaining a foreclosure judgment. In addition, a foreclosing party would be required to take action to ensure that the property is reoccupied within 180 days of taking title.
- Establish electronic registry of vacant and abandoned properties. The legislation will promote communication between local governments and mortgagees responsible for property maintenance.
- In cases where homes are vacant, CRF will offer a mechanism to expeditiously complete a foreclosure and work with land banks, Community Development Financial Institutions, and other local nonprofits to rehabilitate properties and resell them to new buyers.
ADDITIONAL INITIATIVES TO COMBAT ZOMBIE PROPERTIES
The FY 2017 Budget invests nearly $20 billion for comprehensive statewide housing and homelessness action plans. Over the next five years, the $10 billion housing initiative will create and preserve 100,000 affordable housing units across the State, and the $10 billion homelessness action plan will create 6,000 new supportive housing beds, 1,000 emergency beds, and a variety of expanded homelessness services.
As part of the Governor’s ongoing efforts to assist future homebuyers and existing homeowners, this investment includes more than $100 million in available funds to help new homebuyers purchase and renovate “Zombie” properties and support existing low- and middle-income homeowners with major repairs and renovations. Funding is available through the New York State Homes and Community Renewal to establish the new Neighborhood Revitalization Program and provide grants for not-for-profit organizations and municipalities throughout the state to rehabilitate, repair and improve homes.
