MASTIC BEACH, N.Y. — They call it “The Matrix,” the trove of maps at City Hall that pinpoint all the “zombie houses” in this 4.2-square-mile seaside community. There’s one on nearly every block.
“It’s like a cancer,” Mayor Maura Spery said. “Each one of these is hurting property values for six or seven houses around it. Who wants to live in a place with so many vacant houses?”
The vacant properties are called zombie houses because their ownership is in limbo: mortgage holders have left, but banks haven’t yet taken possession through foreclosure, leaving the properties abandoned and often decaying.
A relic of the Great Recession, zombie houses remain and are even growing in several states, including New York, New Jersey and Massachusetts, which together account for 40 percent of the nation’s vacant foreclosures. Over the past year, the number of zombie houses also has risen in Oklahoma, Michigan and Washington.
State and local officials like Spery are tired of them and are demanding or taking action. They say the public cost of trying to maintain the vacant houses is unacceptable, and say the zombies are driving down the value of neighboring property.
New York Attorney General Eric Schneiderman has proposed requiring banks to take responsibility for maintenance as soon as a house is vacant, so they can’t avoid responsibility by postponing foreclosure. In February Schneiderman announced a $3.2 billion settlement with Morgan Stanley, part of which will help local governments offset the costs of dealing with the properties.
In Memphis, Tennessee, a neighbor can collect a $25 credit toward eventually buying a home each time he cuts the grass at an abandoned property under a “mow to own” program. It’s an approach that’s also been used in St. Louis; Columbus, Ohio; and Rockford, Illinois.
In New Jersey, which has more than 4,000 zombies — the most of any state — lenders by law must notify local governments about properties that become vacant before foreclosure is finished, and must be available to help with repairs and maintenance. The law allows towns to fine lenders up to $2,500 a day if they don’t comply.
As the nation’s housing market has improved, the number of zombie houses declined from 46,715 in 2013 to 19,793 by the start of this year, the real estate information company RealtyTrac estimates. That’s a 58 percent drop.
Entering the year, Suffolk County, New York, where Mastic Beach is located, had the highest number of zombies in the country, at 625, followed by Camden, New Jersey, at 596. RealtyTrac bases its estimates on matching houses in foreclosure with vacancies reported by the U.S. Postal Service.
“It’s improving nationally but becoming more concentrated in some areas,” said Julia Gordon, executive vice president at the National Community Stabilization Trust, a nonprofit that works with local governments to free up zombies and other troubled properties for use as affordable housing.
Many advocates for property owners say foreclosure delays often are caused by banks or contracted loan servicers that deliberately back out of proceedings before taking possession to avoid legal responsibility for the property.
The rate of foreclosure rose more quickly during the crisis, and stayed higher afterward, in states with lengthy court-supervised foreclosure procedures, Mortgage Bankers Association surveys of loan performance show.
As of late last year, according to association economist Joel Kan, nearly 3 percent of loans were in the foreclosure process in states with court-supervised foreclosure laws, compared with 1 percent for other states.
Richard Simon of Bank of America said foreclosure delays are common in a state like New York because of the lengthy process. But, he said, it’s never in the bank’s financial interest to step back from foreclosure to avoid responsibility for a property.
“Extended foreclosure and property preservation are quite expensive and only add to the large financial losses already being absorbed in most foreclosures,” Simon said.
But Peter Skillern, director of Reinvestment Partners, a North Carolina nonprofit that advocates for fairer lending in poor communities, said: “Sometimes the reality is that these banks have thousands of these houses and they really don’t know what to do.”
The New York proposal would also establish a hotline for residents to report vacancies, and would require banks to notify homeowners that the law permits them to stay in their homes until ordered to leave by a judge.
The argument is that the presence of the original owner would help prevent decay of the property, while making it easier to establish ownership so a loan could be restructured or the property sold in a short sale.
Homeowners are often shocked to find out that they still own houses they thought were foreclosed, and that they may even be responsible for cleanup bills, said Judith Fox, a facilitator for state foreclosure court in Indiana, who is conducting a study of abandoned housing in South Bend.
Experimental “land banks” that can accept donated houses from banks and repurpose them have sprung up in New York’s Syracuse and Suffolk Counties.
Oklahoma — where zombies have almost doubled in the past year, to 225 — passed a law in 2014 allowing towns to recover costs for maintaining vacant houses through tax liens.
The law also allows the city to charge owners for police and fire calls to abandoned homes, services that cost the city $6.4 million a year, a 2013 study found. Property values were $2.7 billion lower because of the zombies.
One part of the New York law would create a statewide registry, run by the Attorney General’s Office. Fines for failing to register would go to local governments to help pay for responding to complaints about zombie properties. That would be a welcome development, Mastic Beach’s Spery said.