AUGUSTA — A bill that seeks to give Maine cities and towns more power to deal with abandoned and blighted properties is held up in a legislative committee because of opposition from bankers.
The bill, LD 1203, sponsored by state Sen. Nate Libby, D-Lewiston, places a host of new requirements on financial institutions once they begin the foreclosure process on a building. The measure is a response to more than $1.5 million the city of Lewiston has paid in recent years to demolish dilapidated, multifamily properties abandoned in the downtown.
Libby’s bill would require banks in the foreclosure process to pick up any costs a city incurs to secure and protect properties that have been abandoned and the city has placed liens on for failure to pay property taxes.
But a lobbyist for Maine’s banking industry told the Legislature’s Judiciary Committee on Monday that banks should not have to pay for properties they don’t legally own yet.
Bankers previously opposed a provision in the bill that would have allowed cities to fine banks for failing to resolve building code violations on properties on which they have foreclosed. Libby said he agreed to remove the provision, which sought a $2,000 per day fine on properties that were not up to code.
“I think in many of these cases you have owners who have totally walked away from these properties and that’s the burden that has been put on them,” Christopher Pinkham, a lobbyist for the Maine Bankers Association told the committee. He said bankers had “grave concern” that a requirement that the lender cover the costs keeping a property up to standards “would send a dark cloud over the future likelihood of lenders putting money into any multifamily property.”
But lawmakers on the committee, including state Sen. Christopher Johnson, D-Somerville, said cities and towns also had “grave concerns,” largely over the costs of demolition and the impact blight has on overall property values in a neighborhood.
“If the bank stands, in the property’s decline, to lose more over time, then wouldn’t that be an incentive to proceed with foreclosure and have the property transferred to an owner who does want to keep it up?” Johnson asked.
He said the core issue of the bill was that properties were being allowed to fall into disrepair and become targets of vandals and copper thieves long before any foreclosures were taking place.
“In doing so, they are taking the rest of the neighborhood with them and in some cases have been shown to be creating hazards,” Johnson said. “If these are properties that are not attractive to the mortgage holder to own, what’s the encouragement for anyone to maintain the property at that point?”
Pinkham said banks understood the position cities and towns were being put into, but he believed the bill went too far.
Another provision removed from the bill was one that allowed cities and towns to determine abandonment, in part, based on the amount of garbage or debris that had accumulated on a property.
Libby’s bill still requires banks to notify cities and towns once they begin a foreclosure process on a property. The legislation also requires banks to assign an in-state contact person to be responsible for the property and be a contact for city officials concerned about code violations as well.
Libby said other states, including New Jersey, have similar laws to protect municipalities from incurring the costs from lending decisions that resulted in foreclosures and abandonment.
According to testimony the committee received from Lewiston City Manager Ed Barrett, Lewiston has condemned 74 properties since 2012 and has demolished 58. Barrett said even when properties were foreclosed on they were not cared for properly.
“When banks have foreclosed on properties, they often continue to neglect them, taking no action to secure them or preserve them,” Barrett said. “In one instance, another out-of-state bank completed a foreclosure on a multifamily property and then simply ignored it. It was vandalized, condemned and demolished.”
Barrett said the city was contacted by banks seeking information on the condition of properties they have mortgaged, “long after the building has been demolished.”
Cities also face the problem of “orphaned” properties that an owner has abandoned, “and the banks, for whatever reason, take no action to even begin foreclosure, or if begun, do not pursue it,” Barrett said.
Libby, a Lewiston city councilor, said he would continue to work with the state’s banking community to come up with a compromise but suggested Monday that could be a challenging task.
Others on the committee voiced frustration that the buildings in question could belong to nobody.
“It can’t be true that nobody is responsible for these buildings falling down in our community,” said state Rep. Charlotte Warren, D-Hallowell. “That just is not acceptable to me.”
The bill will return to the committee for another work session in the days ahead.
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