Heat Builds for Banks: New York AG to Push for More Foreclosure Responsibility

by on Foreclosure Crisis

Heat Builds for Banks: New York AG to Push for More Foreclosure Responsibility

As 2014 advances, the nation’s foreclosure problem continues. While foreclosure properties are not nearly as prevalent as they were only a couple of years ago, they still abound – and one state attorney general isn’t going to let banks forget.

New York Attorney General Eric Schneiderman, long a fierce advocate for homeowners and an ardent enemy of big banks, is targeting banks who have an abundance of abandoned foreclosure properties, the kind that stay on a bank’s ledgers and contribute to price drops and neighborhood blight but aren’t being marketed or sold to prospective buyers.

Currently, one can find blocks full of vacant foreclosures across the country, not just in metro areas like Detroit, Cleveland, and Las Vegas but in suburbs. Banks that own these properties do little more than place the property for auction when it initially falls into foreclosure – leaving them open for vandalism, squatting, and other dangers.

Plus, each foreclosure that stays on the market and isn’t purchased creates a negative pressure on nearby prices, which further contributes to real estate problems.

AG Schneiderman plans to force banks in the state to bear more responsibility for so-called "zombie properties". Part of the plan would create a state-wide registry of these abandoned foreclosures so that cities can keep track of them and enforce code violations against the banks that own them.

Foreclosure Stamp Across a Luxury Home

A zombie property on Carson Avenue in Newburgh, N.Y.

He is also calling for more land banks in the state. Land banks are institutions that have the power to purchase abandoned properties and foreclosures and either renovate them or tear them down completely.

It’s hard to believe that a city the size of New York City doesn’t have a single land bank, but it’s true – which is one of the motivators behind Schneiderman’s decision.

As other attorneys general across the country follow suit, the number of zombie properties could decline, and fewer foreclosures could contribute to more increases in value for other properties – like the increase the country has witnessed over the past year. Currently, the national median sales price stands at $198,000, up 9.9% from December 2012. That strong increase comes on the back of stronger anti-foreclosure efforts nationwide, and a renewed interest in getting foreclosure properties off the books and into the hands of homeowners and investors.

Seeing as how Schneiderman typically gets his way when he tangles with the big banks in his state, New York’s zombie property problem could near resolution over the next 12 months. If that is a success, other states will more than likely follow suit.

Image source: NYTimes.com / NewsDay.com

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