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Smithtown Town Board considers bill to establish foreclosure registry

Vacant homes such as this one in Nissequogue

Vacant homes such as this one in Nissequogue would be included in a bill to establish a foreclosure registry that the Smithtown Town Board is scheduled to take up Nov. 3. Credit: Newsday / John Paraskevas

Smithtown would register homes that are vacant, have had utilities shut off or are in foreclosure under a bill the Town Board is scheduled to take up Nov. 3.

Not all homes that would be placed on the registry are derelict, but the ones that are generate a steady stream of complaints from neighbors about quality of life and endangered property values. Hearings to authorize town cleanup of such properties have become a feature of Town Board meetings, accompanied by photographs of hip-high weeds and refuse-strewn yards.

The bill is intended to avert foreclosure actions and prod owners — who may not be residents but out-of-state banks or limited liability corporations — into doing regular upkeep. It would also for the first time bring regular scrutiny to Smithtown homes that have been sold out of foreclosure by a bank but remain vacant.

Of Smithtown’s 39,357 homes, 902 would go on the registry if the bill were passed into law today, according to town data. Of those, 552 are considered foreclosure properties, whose mortgager has missed three or more payments; 96 have had utilities shut off; and 254 are vacant but not in foreclosure. LLCs own 96 of those vacant homes.

Cathy Caillat, Smithtown’s assistant director of public safety, said LLC involvement was potentially problematic because state records for those companies may not include enough information to contact anyone responsible for property maintenance.

Town officials first identified the LLCs’ role in 2017 when "we started background research for ownership and LLCs kept coming up," said Caillat, who leads a team of three code enforcement officers who track and inspect problem homes. Sometimes the only contact those companies list in state business records is a law firm or accountant, and "they were not being forthcoming with the actual owner’s name and contact information," she added.

The town registry would require a name, phone number, email and mailing address for each property owner. It would also mandate regular maintenance and inspections. Each registrant would pay a $500 fee every six months.

New York State and a number of municipalities, including Babylon, Brookhaven and Smithtown, already track homes that are in or at risk of foreclosure. Helene Caloir, director of the New York State Housing Stabilization Fund at Local Initiatives Support Corporation, which manages the state grants that have funded vacancy work by Smithtown and other Long Island municipalities, said the town’s performance so far had been "the gold standard… They are not just responding to complaints but systematically figuring out where vacants are, who’s responsible."

She cautioned, though, that town officials would need to take special care to avoid inadvertently registering elderly or frail people who might not be able to maintain their properties.

Andrew Lieb, a real estate lawyer based in Smithtown, said a wrongful listing could result in lawsuits against the town or banks. He also warned that aspects of the town bill could be preempted by state law, though town attorney Matthew Jakubowski disputed this.

"It’s better to lobby the state to clean up state laws," Lieb said. "Go to the assemblyman, go to the senator: ‘Here’s our problem, please help us.’ "

Smithtown’s current vacancy rate is 2.4%, versus 12.29% for Suffolk County, according to data compiled by RealtyTrac and shared by the town. But the cost of ownership is higher in the town, with a median monthly cost of $3,139 versus $2,820 in the county, according to the U.S. Census Bureau. The Census also suggests that a greater portion of homeowners in the town are financially stretched than in the county overall. Of Smithtown households with a mortgage, 29% spend more than 35% of income on ownership costs, versus 27.7% of households in the county overall.

Much of the town’s vacancy problem can be traced to a wave of foreclosures after the 2008 financial crisis.

"Banks had targeted this community because there were many homes of high value," Caillat said. "They were issuing mortgages and second mortgages, and then when the market crashed, many people lost their jobs."

The state Attorney General grant that funds the work of Caillat’s team is due to expire in June. The attorney general's press office did not respond to a question about whether the funding would be continued, though Town Supervisor Edward Wehrheim said the registry would largely pay for itself through its fees. Continued town oversight will be a priority, he said.

Looming even larger than the possible loss of funding is the effect of the pandemic. The number of vacant or foreclosed homes that Smithtown officials track is already up 2.5% from last year, Caillat said. After a statewide hiatus that started last March, foreclosure lawsuits and sales are resuming; a moratorium on foreclosures and evictions for single-family homes for homeowner loans backed by Fannie Mae or Freddie Mac is set to expire Dec. 31.

"There are going to be people who are going to be in default because they are affected," said Susan Vincennie, president of Long Island Profiles, a real estate data provider in Nesconset. "There are also going to be a lot of people who are in default because they stopped paying their mortgage" under lenders’ forbearance programs. Some of those programs will require lump-sum payments and fees that mortgagers may be unable to make, she said. Without intervention, she said, a wave of foreclosure filings could hit in the first quarter of 2021.

Caillat and her colleagues "are bracing ourselves," she said, and have stepped up their outreach to homeowners in distress.

REGISTRY DETAILS

The proposed Smithtown registry would cover:

552 foreclosures, including those where the mortgager has missed three or more payments

254 homes that are vacant but not in foreclosure

96 homes that have had utilities shut off

Source: Smithtown Public Safety Department

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