BILL NUMBER: S1426
SPONSOR: LIU
 
TITLE OF BILL:
An act to amend the real property actions and proceedings law, in
relation to directing the department of financial services to conduct
periodic inspections of vacant and abandoned residential real property
required to be maintained by the mortgagee, authorize the department of
financial services and municipalities to impose a daily civil penalty
upon mortgagees which fail to maintain abandoned and vacant residential
real property, and requiring lenders having a duty to maintain residen-
tial real property to register with the statewide vacant and abandoned
property registry
 
PURPOSE:
To help community residents and municipalities address the growing prob-
lem of vacant and abandoned residential properties owned by the mortgage
loan servicer or lender by enhancing the statewide registry of vacant
and abandoned property, requiring inspections of the property by the
department of financial services, and adding penalties for failure to
maintain the property.
 
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 of the bill amends section 1307 of the real property actions
and proceedings law to require the department of financial services
(DFS) to inspect vacant and abandoned properties within four months of
the lender, assignee, or mortgage loan servicer registering the property
with the vacant and abandoned registry after the bank receives a judg-
ment of foreclosure. DFS must conduct a follow-up inspection every six
months thereafter until the property's ownership has been transferred
through closing of the title.
Section 2 of the bill amends section 1307 of the real property actions
and proceedings law to allow DFS or municipalities to impose a civil
penalty of $500 for each day that a mortgage loan servicer, lender, or
assignee who owns the property fails to maintain the property.
Section 3 of the bill amends section 1308 of the real property actions
and proceedings law to require DFS to inspect the vacant and abandoned
property prior to the judgment of foreclosure. DFS must inspect the
property within four months of the property being registered by the
lender, assignee, or mortgage loan servicer on the statewide vacant and
abandoned registry, and DFS must conduct a follow-up inspection every
six months thereafter until the title is transferred.
Section 4 of the bill amends section 1310 of the real property actions
and proceedings law to expand the statewide vacant and abandoned regis-
try to include property owned by the lender, assignee, or mortgage loan
servicer after a judgment of foreclosure until they transfer ownership
of title. The lender, assignee, or mortgage loan servicer would be
required to provide additional information to the registry, including
the date that the judgment of foreclosure was entered, the date the
property was deemed vacant and abandoned, and whom from the lender,
assignee or mortgage loan servicer entity is authorized to accept
service of process.
Section 5 states that this bill shall take effect on the first of Janu-
ary after the bill becomes law.
 
EXISTING LAW:
Section 1307 of the Real Property Actions and Proceedings Law, which was
added in 2009, requires lenders, assignees and mortgage loan servicers
that obtain a judgment of foreclosure and sale to maintain the property
if the property is vacant and abandoned, until they transfer ownership
of the property in a foreclosure sale.
Section 1308 of the RPAPL requires lenders, assignees and mortgage loan
servicers to maintain vacant and abandoned property prior to the filing
of the foreclosure action in order to address zombie properties that
lack ownership. DFS is authorized to bring a civil penalty of up to $500
per day per violation for failing to maintain the vacant and abandoned
property.
Section 1310 of the RPAPL establishes an online registry maintained by
DFS related to vacant and abandoned property owned by a lender, assignee
or mortgage loan servicer prior to a judgment of foreclosure. Lenders,
assignees and mortgage loan servicers can face penalties of up to $500
per day per violation for failure to report the property to the regis-
try.
 
JUSTIFICATION:
Vacant and abandoned residential properties securing delinquent mort-
gages fall into disrepair and harm neighboring properties and the
surrounding community. These properties are a disturbance in neighbor-
hoods because they are often boarded up, inhabited by squatters, or used
for criminal purposes. When a vacant and abandoned property is not main-
tained for an extended period, there is a decline in the community's
real estate market and the state's property tax base. There is also an
increased likelihood of crime in and around the property. There are
instances of such properties being used by criminals to manufacture
and/or distribute illegal drugs.
Municipalities are often forced to expend taxpayer funds to prevent a
vacant and abandoned property from becoming a public hazard. If a muni-
cipality is forced to care for a significant number of vacant and aban-
doned properties, its budget can be depleted quickly. This legislation
expands on the 2009 and 2016 laws by adding bank-owned properties to the
DFS registry of vacant and abandoned property so that the state and
municipalities can monitor maintenance obligations. Existing law
currently requires reporting of vacant and abandoned property to the DFS
registry before a judgment of foreclosure is entered but does not apply
to properties owned by the servicer post-foreclosure.
The legislation also seeks to strengthen enforcement of maintenance
obligations by requiring DFS to perform periodic inspections of the
property, and giving DFS the ability to issue fines for the servicer's
failure to maintain the property after a judgment of foreclosure is
entered.
 
PRIOR LEGISLATIVE HISTORY:
01/03/24 REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT
02/09/23 REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT
01/05/22; S414 - REFERRED TO HOUSING,CONSTRUCTION, AND COMMUNITY DEVEL-
OPMENT
01/06/21; S414 - REFERRED TO HOUSING,CONSTRUCTION, AND COMMUNITY DEVEL-
OPMENT
 
FISCAL IMPLICATIONS:
To be determined.
 
EFFECTIVE DATE:
January 1 of the year after it shall have become law.

Statutes affected:
S1426: 1307 real property actions and proceedings law, 1307(3) real property actions and proceedings law, 1308 real property actions and proceedings law, 1310 real property actions and proceedings law, 1310(2) real property actions and proceedings law