The state Senate is trying again to increase penalties for banks and finance companies that aren’t adequately maintaining foreclosed properties.
S.5321 passed the Senate last year, but was not passed in the Assembly. The Senate passed the legislation again late last month in a 46-17 vote with Sen. George Borrello, R-Sunset Bay, among the 17 votes against the bill. The legislation, if approved by the Assembly and then signed by Gov. Kathy Hochul, would increase the maximum civil penalty from $500 to $1,000 a day per property for each day the property is in violation of local property codes.
Borrello’s opposition stems from the legislation’s focus on state-chartered banks, a segment of the banking community Borrello said doesn’t reach the major mortgage lenders while imposing an additional burden on smaller, local banks. Borrello said he fears state-chartered banks merging, closing or becoming federally chartered banks to avoid additional state regulations like S.5321.
“As the ranking member of the Senate banks committee, one of my major concerns is the fact that pretty much any bill that we pass in this legislature only impacts our state-chartered banks,” Borrello said. “Our state-chartered banks are becoming unfortunately a rarity. Most big banks are federally chartered. And a bill like this, while it’s trying to address a problem like zombie properties, only applies to our state-chartered banks, which are typically our community banks, the local banks that can make decisions, that can lend money to people who may be on the border. Those are the only ones that are impacted by bills like this. In fact, 68% of the mortgages in New York are actually done by non-bank companies. They will not be impacted by this.”
Borrello said the state would be better off by shortening the time a property spends in foreclosure so that properties don’t spend so much time empty. New York’s foreclosure process is among the longest in the nation.
“Now I understand that zombie properties are really a plague, especially in parts of rural Western New York where I’m from,” Borrello said. “But if we really want to do something about that we should come up with effective ways to allow these banks to resolve those properties as soon as possible. But we’ve done the exact opposite here. We’ve made it more and more difficult for banks to resolve those foreclosures. And now we say we’re going to make it almost impossible for you to foreclose in a reasonable amount of time, and we’re going to make you pay for the maintenance of that property.”