Assembly Bill A3081 Signed Into Law
On November 21, 2022 Governor Kathy Hochul signed Assembly Bill A3081 into law. The new law specifically preempts local laws, ordinances or resolutions that allow or require the registration of residential mortgages in default prior to the filing of a lis pendens in a court of competent jurisdiction. But why was this law needed in the first place?
Foreclosures Bring Zombie Homes
The fallout of the subprime mortgage crisis in the late 2000s and early 2010s brought a new problem – Zombie Homes. As described by NYC Housing Preservation and Development:
“Zombie Homes” can be defined as vacant, deteriorated small homes whose owners are behind on their mortgage payments. These properties are symbols of the effects of the foreclosure crisis.
Long story short – homes in foreclosure sometimes find themselves with no party willing to pay the cost of maintenance. The homeowner sees no point in maintaining a property they are about to lose, and the bank sees no point in maintaining a property they aren’t inhabiting. The result? Blight.
In response, New York passed the “Abandoned Property Relief Act of 2016” which “imposes a duty to inspect, secure and maintain vacant and abandoned properties on mortgagees or their servicing agents”.
Onslaught of Local Zombie Home Ordinances
Despite the state-level approach to managing Zombie Homes, many local governments began passing their own ordinances. The Town of Brookhaven enacted Chapter 89 – Mortgage-In-Default Registry to “establish a process to limit and reduce the amount of deteriorating properties located with the Town, which is subject to a mortgage which is in default.” Similar ordinances include Section 213-556(b) of the Code of the Town of Babylon and Section 221-7, et seq. of the Code of the Town of Smithtown. Critically, these statutes all required the mortgagee to register the delinquent property with the local municipality – a redundancy already covered by RPAPL 1310.
Assembly Bill A3081 preempts these local laws, consolidating the procedure and simplifying lenders obligations. With a rise in mortgage rates, a drop in home prices, and an rabid inflation, this law may arrive just in time for another foreclosure crisis.