Sweeping law secretly combats zombie homes

By Bill Heltzel

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A new state law that requires banks to report and secure abandoned houses has been hailed as sweeping legislation for combating blight, but the most sweeping aspect of the law may be a section that keeps the information secret.

The so-called “zombie properties” law requires the Department of Financial Services to keep a registry of vacant properties. But DFS must treat the information as confidential, exempt it from the state Freedom of Information Law and restrict access even to elected officials.

“This is triple top secret territory,” said John Kaehny, executive director of Reinvent Albany, a nonprofit organization that advocates for government transparency. “Why is this necessary?”

When the housing bubble burst in the early 2000s and the financial crisis of 2007 – 2008 stalled the economy, homeowners delinquent or in default on their mortgages or facing foreclosure walked away from their houses. Neighborhoods became blighted. Property values dropped even more.

Gov. Andrew Cuomo signed bills in June that are meant to counteract the ill effects of those vacant zombie properties.

Exactly how many homes have been abandoned and who is responsible for them has been an ongoing mystery. One of the new laws gives the state a tool for cataloging many of those properties. And the Department of Financial Services has published a proposed regulation to implement that law.

The law requires banks to secure, protect and maintain vacant and abandoned residential properties that still have mortgages. They must inspect properties they believe are vacant or delinquent on their mortgage. And they must report the abandoned properties to DFS.

The agency will compile an electronic registry that includes details, such as who is responsible for maintaining abandoned houses.

The DFS superintendent may disclose information that she determines is in the public interest, but that information must be treated as confidential unless the superintendent gives the recipient written permission to disclose it.

Elected officials may request registry information in writing but only on properties in their district or political jurisdiction. The superintendent can require the elected officials to certify that the information they want will further the purpose of the law.

The DFS official can require anyone receiving registry information to sign a confidentiality agreement and to periodically certify that confidentiality was maintained.

“It’s not about keeping it secret or hiding it,” said DFS spokesman Richard Loconte, “but handling it in a responsible way.”

“We don’t want squatters and people stripping houses of pipes, and say, ‘Here’s a list of all abandoned properties in the state and have at it.’”

Anyone can report a vacant property or ask if a property is on the registry, he said, and DFS will confirm if the property is listed.

State Assemblyman Michael Kearns, who represents the Buffalo area, has pressed for greater disclosure and accountability by banks that hold loans on zombie houses. He has counted more than 2,000 abandoned properties in Erie County. He thinks it is the banks that don’t want the registry information disclosed.

Kearns said he voted for the law reluctantly because it is too vague and makes it difficult “to get at those public records.” But it does have good measures for identifying and maintaining abandoned properties. “It’s the best deal for the time being,” he said.

Kaehny, who is also co-chair of New York City Transparency Working Group, said the regulation may make it harder for the public to learn where zombie properties are, which banks own them and how long they have been abandoned.

“It is mind-boggling that Albany took a bill intended to shed light on the serious problem of zombie properties and twisted it into law that weakens the Freedom of Information Law and makes it harder for the public to hold banks accountable,” he said.

DFS should make it clear that the law does not affect public records that are currently disclosable, Kaehny said. And the agency should publish basic data about zombie properties, including addresses and the banks that own them.

Robert Freeman, executive director of the New York State Committee on Open Government, pointed out that legislators passed a law that restricts their own access to information. DFS is merely proposing a regulation that this law dictates.

“This is crazy,” he said. “Did they think it through? Did they engage in the Aretha Franklin principle?” Freeman was referring to her song “Think.”

“This kind of statute drives me bananas,” he said. “Is there not a public interest in knowing where zombie properties are? I think there is.”

The public can comment on the proposed rule during a 45-day period that began on Oct. 12. The regulation can be found at dfs.ny.gov/legal/regulations/proposed/rp422t.pdf

The law goes into effect on Dec. 20.

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About the author

Bill Heltzel
Bill Heltzel has covered criminal justice, courts, government and sports – as a beat reporter and investigative reporter – for daily newspapers in Florida, Indiana, Ohio, and Pennsylvania. He worked for Bloomberg LP in training and sales. He joined The Business Journal in 2016.

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