Beware of Zombie Properties

March 3, 2014 at 8:49 am Leave a comment

The great Boston Celtic Center Bill Russell once commented that fans don’t think they react.  All too often I think the same can be said of our elected representatives. 

If you make mortgages in New Jersey, you should take a look at .A347, which overwhelmingly passed that state’s assembly late last week.  The bill is the latest attempt to deal with the serious problem of so-called zombie property.  This is property which has been abandoned following the commencement of a foreclosure but for which no foreclosure has been completed.  Localities not only in New Jersey but New York have been advocating for the authority to make the foreclosing lender maintain the property during the foreclosure process.  Attorney General Eric Schneiderman is seeking a similar approach for New York.

The legislation passed by New Jersey’s Assembly mandates that a creditor that files a notice to foreclose on residential property that subsequently becomes vacant may force the lender to cure any violations regarding state or local housing codes.  Keep in mind the views I express are mine and do not necessarily reflect those of the Association, let alone the good credit unions of New Jersey.  The most troubling aspect of this approach is that the lender is being asked to take responsibility for property it does not own.  Secondly, by mandating that the abandoned property be brought up to code the lender is not being required to simply maintain property but improve it.  Finally, what is the NJ Legislature going to do in those situations where a home owner seeks to reclaim property for which the foreclosure process is yet to be completed.

According to the National Association of Realtors, as of 2013, there were 300,000 zombie properties across the U.S.  I would bet you that those properties are disproportionately in states with drawn out foreclosure processes.  Rather than make lenders responsible for property they do not own, housing advocates should take a look in the mirror and realize that so-call foreclosure protections needlessly delay the transfer of property to lenders and indirectly drive up the cost of homeownership for everyone. 

My compromise position for the good people of New Jersey is to couple any requirement for lender foreclosure maintenance with an expedited foreclosure process for the affected property.

Entry filed under: Advocacy, Legal Watch. Tags: , , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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