Banks are allowing foreclosed homes in New York City's communities of color to rot with impunity, costing the city millions in unpaid fines and worsening the affordable housing crisis.

According to a report issued Tuesday by a coalition of New York State Democrats, local and international banks owe the city more than $2 million in unpaid Department of Buildings or Department of Housing, Preservation and Development fines on around 200 foreclosed homes.

About eighty percent of these bank-possessed homes are located in communities of color, where 50 percent or more of the residents are black or Hispanic. State legislators argue that the phenomenon is causing property values in impacted neighborhoods to plummet, and exacerbating the City's current housing crisis.

An AM New York report published in July detailed a related phenomenon—before a home can be formally possessed by a bank, it must wind through a foreclosure process that is, in New York, notoriously lengthy. A house that is abandoned by its owner and awaiting repossession is called a "zombie house."

According to Realtytrac data, the city saw an overall 28% increase in the number of zombie houses between January 2014 and May 2015. Kings County had the most zombie houses as of last May, at 1,050. Queens County came in second with 905 zombie homes.

New York State's foreclosure process can take up to three years, and in the meantime, these houses tend to decay. Once banks take possession, the state of disrepair is already significant.

According to the findings of this week's report, as of July 2015 Deutsche Bank was the worst offender in the outer boroughs, owing close to $400,000 in unpaid housing violations. US Bank was a close second, followed by Midfirst Bank which owes more than $200,000.

These same banks—Wells Fargo, Deutsche Bank, and Fannie Mae among them—have caused New York homeowners to lose an estimated $14.4 million in home value depreciation.

This calculation relies heavily on a 2008 report in the Journal of Urban Economics, which found that, on average, a foreclosed home reduces the value of all homes standing within a 300-foot radius of an abandoned home by 1.3 percent.

The report documented shy of 1,800 open violations at bank-owned foreclosed houses in the outer boroughs, and calculated that on average, houses within 300 feet of them lost $5,771 in value. City-wide, value depreciated by $14.4 million.

Wells Fargo had the most open violations, 337 HPD and 30 DOB, followed by US Bank with 182 HPD and 66 DOB.

Daren Blomquist, Vice President of the national foreclosure tracking website RealtyTrac, explained the impact of foreclosed houses on local real-estate.

"If you as a neighbor want to sell your house, and you have one of these vacant foreclosures in the neighborhood, you're going to have trouble selling your house for full market value," he said. "Even if your property is in good condition, it will automatically sell for lower."

Reached for comment, Deutsche Bank denied that it was responsible for collecting fines on foreclosed homes to which they are attached, arguing that, as trustees, they simply keep records on properties once they are foreclosed.

"As trustee, Deutsche Bank is not responsible for the maintenance of foreclosed properties," said spokeswoman Oksana Poltavets in a statement. "Rather, loan servicing companies are responsible for property maintenance, as well as responding to legal proceedings, such as building code citations, arising from property maintenance issues.”

"That's part of the problem: confusion about who's responsible," said Blomquist. "Deutsche Bank may be listed as the beneficiary who would take possession if the property is foreclosed, but someone has hired a company to service to the loan, and they are the company responsible for collecting payments or going on in foreclosure."

Study authors say that because the banks are the entities listed as owners of the foreclosed homes in city documents, it is their responsibility to maintain them.

"It flies in the face of the intent of the law to claim that the owner of record for a property is not responsible for that property," said State Senator Jeff Klein in a statement. "Deutsche Bank has no problem foreclosing on people's homes and claiming ownership—until negative publicity comes out of their irresponsible actions."

In an effort to address bank-owned and zombie houses together, New York Democrats Jeff Klein and Diane Savino have suggested a two-part package of laws.

The first, in conjunction with Attorney General Eric Schneiderman's Abandoned Property Neighborhood Relief Act, would require mortgage lenders to keep track of and maintain abandoned houses in a formal registry.

The second would require banks and loan service companies to maintain abandoned homes as soon as they are discovered to be abandoned, rather than waiting until foreclosure proceedings have been completed.

In May, 11 banks, mortgage lenders, and credit unions across the state agreed to adopt "best practices" to maintain homes during the foreclosure process.

"A gentlemen's agreement between lending institutions and New York State to maintain properties... will not go far enough to rid New York of this blight," the study authors retorted. "Under no duty or penalty of law, this issue will remain unresolved."

We have reached out to the DOB and HPD for comment on any efforts to hold banks accountable for violations and foreclosed properties, and will update with any additional information.