A recent article in the Dayton Daily News discusses the successes of their rental registry/inspection program.
Some of the results include;
- Rental property violations dropped by more than half, in the past two years.
- Fines for non-registration or non-compliance falling by more than 60 percent to near single digits.
To view the article, please click here.
As previously reported, in July 2019 New York State Attorney General Letitia James announced $9 million in grants to address the growing statewide issue of “zombie homes” – vacant or abandoned homes that are not maintained during a prolonged foreclosure proceeding.
On January 15th, Attorney General James announced over $8 million in grant awards as part of the Cities for Responsible Investment and Strategic Enforcement (“Cities RISE”).
Cities will use these grants to launch innovative programs related to housing and strategic code enforcement. The program aims to innovatively address and transform blighted, vacant, or poorly maintained problem properties through the use of housing and community data from various state agencies.
To view the Attorney General’s Press Release, including comments from the recipient communities, please click here.
To view media coverage from the Yonkers Tribune, please click here.
“Most issues can be traced back to faulty loan servicing with an often-revolving cast of loan companies”
Similar quotes were frequent during the last foreclosure crisis. However this quote comes from a USA Today report on reverse mortgages and the challenges heirs experience, including foreclosure.
To view the article, please click on the following link:
As reverse mortgages end, heirs are left with heartache
On December 18th issued the following press release regarding his signing of the “Zombie Property Remediation Act of 2019”
To view the final language, please click here.
To view local reporting, please click here.
New Law Authorizes Municipalities to Compel Mortgage Lenders to Either Complete a Mortgage Foreclosure Proceeding or Issue a Certificate of Discharge for Abandoned Properties
Governor Andrew M. Cuomo today signed legislation (S.5079-A/A.1859-A) – or the Zombie Property Remediation Act of 2019 – allowing municipalities to better address zombie properties that are plaguing their communities. The new law will authorize local governments to compel mortgage lenders to either complete a mortgage foreclosure proceeding or to issue a certificate of discharge of the mortgage for any abandoned property, allowing local government officials to deal with these properties that decrease surrounding property values and put on a strain on municipal resources.
“Zombie properties are plaguing communities all across our state, driving down property values and burdening our taxpayers,” Governor Cuomo said. “By making it easier for local municipalities to deal with these abandoned and unmaintained properties, we are helping to preserve homes and protect the quality of life in our neighborhoods.”
Thousands of abandoned properties are blighting communities throughout the state, and zombie properties – abandoned homes that have been foreclosed upon by a bank and are not tended to by anyone – are complicating the efforts of local government officials to deal with these properties. Zombie properties can sit in legal foreclosure limbo for years, sometimes deteriorating to the point that the buildings must be demolished while the mortgage lender fails to complete the foreclosure process. This new law will make it easier for municipalities to reclaim and redevelop zombie properties in order to return them to the property tax rolls.
This new law goes into effect immediately.
Senator James Skoufis said, “Zombie properties across New York State continue to plague our main streets, are dangers for first responders, and make code enforcement an even more difficult task than it already is. This law will equip municipalities with a real tool to better hold big banks accountable to our communities, clean up our neighborhoods, and strengthen our property values. I thank the Governor for signing this bill into law and look forward to continuing to fight for our local governments and taxpayers.”
Assembly Member William Magnarelli said, “I thank the Governor for signing this important bill into law. ‘Zombie’ properties continue to plague our communities and damage neighborhoods. The new law will give localities a legal remedy to compel action on these abandoned properties by mortgage holders. This will help get them out of limbo and return them to the tax rolls and productive use.”
Property conditions are generally contingent on several factors. Of course occupancy status is the primary factor but there are several others including usage and who resides in the property (i.e. owner occupant vs. rental/tenant).
However, the key underlying issue is who “owns” the property and is “responsible” for it.
With all the concerns with “zombie foreclosures” a bank holding a traditional mortgage has a vested financial interest in the maintenance and upkeep of the property serving as the collateral.
Following one entry in 2018, now a new player has entered the playing field. In what appears to be an updated rent-to-own program, they seek to offer a new generation of homebuyers a different option than the traditional mortgage.
What will the impact be on communities? In regards to property condition the new entity advertises;
“Improvements are Encouraged – Investing in home improvements will enhance your daily living experience and may increase your home’s value. As your partner in homeownership, for any approved home improvements, Fleq will either reimburse you for its pro-rata share of the costs or issue you new equity in the partnership equivalent to the increase in value of the home.”
To view a recent article from Housing Wire on Fleq, please click here.
To view an article from Housing Wire on Divvy, please click here.
Please click on the following links to access the respective company websites.
Following a March 4, 2019 referral to the Senate Budget and Appropriations Committee, S1155 was reported from the Committee and given a 2nd Reading.
To view the current text of the proposed bill, please click here.
Synopsis: Requires registration of certain vacant and abandoned properties with municipalities and provides enforcement tools related to maintenance
of these properties.
BILL DESCRIPTION
This bill requires the responsible party for a vacant and abandoned property to register the property with the municipality in which the property is located. The bill also provides certain enforcement tools related to the maintenance of these properties.
Specifically, the bill establishes a registration requirement for all vacant and abandoned residential and commercial properties. A property would be considered vacant and abandoned if it is not legally occupied by a mortgagor or tenant for residential or business purposes, it cannot be legally reoccupied, and at least two conditions which indicate abandonment exists. The title holder or mortgage lender responsible for maintaining a property would be required to register the property.
Under the bill, a municipality may establish a fee of not more than $250 for the initial registration of a vacant and abandoned property. Thereafter, a municipality may impose a renewal fee of not more than: (1) $500 if there is an outstanding property maintenance or code violation that remains unabated at the time of renewal; or (2) $750 if there continues to be a violation or there is a new violation that remains unabated at the time of renewal. However, if a greater fee for the registration or renewal of a vacant and abandoned property was established by a municipal ordinance adopted prior to the enactment of the bill, then the bill permits the municipality to continue to impose and collect that greater fee.
The bill also authorizes a municipality to require responsible parties for vacant and abandoned properties to undertake certain protective measures regarding these properties. Specifically, a municipality would be able to require a responsible party to enclose and secure the property against unauthorized entry, post a sign on the property with pertinent contact information, and maintain liability insurance.
Additionally, the responsible party would be liable to pay a penalty of not less than $500 and not more than $1,000 for a violation of the bill or any ordinance adopted pursuant thereto. If a greater penalty for these violations was established by a municipal ordinance adopted prior to the enactment of the bill, that greater penalty may continue to be imposed and collected. Each day
that a violation continues would constitute an additional, separate, and distinct offense.
On October 22, 2019 the Office of the Comptroller of the Currency (OCC) amended the regulations and issued a final rule, effective December 1, 2019, for “other real estate owned,” activities for national banks and Federal savings associations.
Following is the summary from the OCC.
The OCC is issuing a final rule to clarify and streamline its regulation on other real estate owned (OREO) for national banks and update the regulatory framework for OREO
activities at Federal savings associations. The OCC is also removing outdated capital rules for national banks and Federal savings associations, which include provisions related to OREO, and
making conforming edits to other rules that reference those capital rules.
Michael Best & Friedrich LLP in a November 11th client alert, provided a thorough summary.
OREO Regulations: Comptroller’s Office Issues Amendments to Regulations on “Other Real Estate Owned”
The federal Office of the Comptroller of the Currency, or OCC, regulates national banks’ ownership of a category of real estate called “other real estate owned,” commonly shortened to OREO. It has been more than 20 years since OCC updated these regulations. That changed on October 22, 2019 when OCC amended the regulations and issued a final rule, effective December 1, 2019, which addresses two areas: (i) clarifying the rules for holding and disposing of OREO, and (ii) eliminating outdated capital rules. The OCC summary explained that the purpose of the amendments is to clarify and streamline the regulation for national bank OREO activities, and to apply that framework to the OREO activities of Federal savings associations.
OREO is bank owned real estate, acquired by the bank in full or partial satisfaction of a debt, and former banking premises, which are held as non-earning assets. The regulations are based on the idea that banks are not, and should not, be in the real estate investment business; they should rather lend money to people who are. As observed after the 2008 credit crisis and ensuing recession, a large portfolio of real estate owned by a bank is not a good thing; it may be a sign that loans are defaulting, resulting in borrowers surrendering properties to the bank, or the bank acquiring properties through foreclosure. A growing OREO portfolio may also be a red-flag to regulators of impending greater problems. The Treasury Department, through OCC, therefore, sets the rules by which banks may hold this nonproductive real property, how they appraise it, how they dispose of it, and how they record the investment proceeds.
The amendments generally maintain the existing standards, including definitions of OREO, market value, and recorded investment amount, and then extend the standards applicable to national banks to Federal savings associations through the OCC’s supervisory powers over Federal savings associations granted in the Dodd-Frank Act. There are a few clarifications however to the older rules worth noting.
First, when an institution acquires OREO by merger or acquisition, the relevant holding period commences on the effective date of the transaction, but does not include any time the acquired entity held the OREO. Second, OREO may now be disposed of under the rules in other ways approved by OCC such as by donating or escheating OREO, or by negotiating early termination of OREO leases; Federal savings associations may also transfer OREO to a service corporation. Third, an appraisal may not be required at acquisition, if doing so would be unreasonable or unsafe due to holdover tenants or squatters, but must be updated as soon as the bank gains access. Fourth, Generally Accepted Accounting Principles, or GAAP, now apply to OREO. Fifth, the Appendices to the old regulations, containing the risk-based capital guidelines for national banks and capital requirements for Federal savings associations, have been rescinded. New clarifications were also added regarding capitalized and operating leases, and the ability of a bank to own real estate for its own use in banking activities. The amendments codified that banks may pay normal operating expenses of OREO (such as taxes, insurance and utilities), and expenses of a business associated with the OREO property.
The complete amended regulation may be found at 84 Fed. Reg. 56369 (Oct. 22, 2019).
In an aggressive approach to “zombie foreclosures, at the request of Alderman James Martuscello, Amsterdam NY Common Council members unanimously voted against removing a property from the tax auction list and accepting a payoff payment from the mortgage holder. Alderman Martuscello. said he is concerned about mortgage holders that obtain properties in the city and allow them to sit vacant for years at a time.
“If they don’t clean them up and sell them, they are just going to go to waste. We can’t let the banks do this anymore. We have to send a message out to them that if they don’t sell them, we are going to sell them for them.”
“If we give it back to the bank, you know what’s going to happen? It’s going to sit there again for another two years, because it has been sitting there. The bank has done nothing to this property. It’s a zombie property.”
To view the full story from The Recorder, please click here.
The Federal Reserve Bank of Atlanta just released a white paper on “VPROs” titled, “Foreclosure Externalities and Vacant Property Registration Ordinances”
Not surprisingly the study showed positive outcomes from the implementation of a vacant property registration ordinance.
From the abstract;
“This paper tests the effectiveness of vacant property registration ordinances (VPROs) in reducing negative externalities from foreclosures………………..and we find that the enactment of VPROs in Florida more than halved the negative externality from foreclosure.”
From the last section of the paper;
“Given that VPROs had relatively little enforcement cost, indeed they raised revenue for the city, they seem a relatively efficacious way to directly address the foreclosure externalities arising from any future downturn in housing markets. Certainly compared to other interventions like the Home Affordable Modification Program (HAMP) that attempted to forestall bank initiated foreclosures (and their spillovers) via costly inducements to banks, VPROs appear to be highly cost effective.”
To view the white paper, please click here.
Several of the 2020 Presidential hopefuls have revealed their housing plans, mostly focused on affordable housing. Recently Sen. Elizabeth Warren (D-Mass.) released an updated proposal which advocates for the creation of a “Tenant Protection Bureau”, with the stated goals being;
- Protect and uphold the rights of tenants
- Tackle the growing cost of rent
- Invest in safe, healthy, and green public housing
- Fight exploitation by corporate landlords
With the ongoing challenge of easily identifying owners/landlords, one key component would include the creation of a “national public database of information about large corporate landlords, by requiring them to report key data to HUD.”
To view the Senator’s press release, please click here.
For a related article from The Hill, please click here.