Lenders on hook for repairs at foreclosed homes

Starting Wednesday, lenders will have to repair roofs, take out the trash and more on some abandoned Long Island homes in the foreclosure pipeline - properties they don't even own yet.

A little-known provision in the state's 4-month-old Mortgage Foreclosure Law puts the onus on lenders as soon as a state court issues a judgment of foreclosure, instead of weeks and months later, when they "buy" the property at auction.

If they don't keep the houses clean and secure between the judgment and the auction, municipalities, condo boards and homeowner associations have the right to make fixes, send the bills to lenders and sue if necessary.

Lenders fought the provision, saying it exposes them to liabilities, such as neighbors' lawsuits, but supporters said it would keep properties from being dumped on and vandalized, bringing down neighbors' property values.

"I've found in my travels talking to towns and villages, a lot of them are doing this on their own dime, meaning it's the taxpayers' money," said state Sen. Jeffrey Klein (D-Bronx), who wrote the provision. "They're going in, making the repairs, because they've gotten so many complaints, and they really don't have any recourse against the lending institutions."

Getting a judgment of foreclosure takes up to two years in New York State.

Last month, lenders got about 380 judgments of foreclosure against homeowners on Long Island, according to Long Island Profiles, a Brightwaters-based real estate data gatherer.

The New York Bankers Association, which represents 150 banks, said the change hurts lenders and borrowers.

"If the neighborhood has problems and the house deteriorates, that's not good for the bankers, either," said Roberta Kotkin, the group's chief operating officer and general counsel.

She said the law unfairly requires lenders to "stand in the shoes of the homeowner and to stand in the shoes of the landlord. It really can act as a tremendous deterrent to giving out future mortgages, because you don't know what the cost is going to be."

In Islip Town, spokesman Kevin Bonner said Tuesday the new law will beef up what the town already does in eyesore cases: "We'll issue violations to the person on the deed. This will enable us to also issue violations to the bank."

Whether the law will help reduce the number of eyesores is unclear. Homes fall into disrepair even when the foreclosure process is complete and lenders own the properties outright.

In Central Islip, where local activists monitor each block to keep on top of such properties, it's often tough deciding whom to hold liable for cleanup and repairs, said Nancy Manfredonia, head of the Central Islip Civic Council. She considers the new law another weapon.

"It will allow us, in the worst-case scenario, to complain not just to the town but the state banking department," she said.

What needs fixing

As owners of foreclosed houses, lenders are held to the same maintenance standards as homeowners under a new state law. That means fixing any problems that keep the properties from being clean, safe and secure, such as: