A consequence of our sucky economy: The city estimates that around 125,000 housing units will go into foreclosure over the next two years.
In many cases, owners (including banks) are trying to unload these buildings, and while they wait, living conditions deteriorate drastically for tenants, with landlords racking up housing code violations for lack of heat and hot water, for toxic mold outbreaks, leaky roofs, and rodent infestations.
Conditions have gotten so bad, in some cases, that city officials have taken a lot of flak from advocates (and from journalists), and these buildings have become PR problems for the city. And so, over the past year, officials have been playing a bigger role, by being a middleman between tenants, banks, older landlords and prospective ones.
Today, city and state officials, and Senator Chuck Schumer, took things a step further by asking the federal government to force a big bank that owns many foreclosed and distressed properties to come clean about their finances and sell the properties to a responsible buyer.
New York Community Bank is one of the most active providers of loans to landlords that buy multi-family dwellings in the city. According to the Urban Homesteading Assistance Board, the bank controls the mortgages on 34 foreclosed buildings, which are home to 800 families. 328 buildings that are owned by the bank and home to 6,000 families are in very shaky condition: they have more than three hazardous health and safety violations per apartment. Until recently, the bank owned five properties that were on the city’s worst buildings list.
Last month, Mutual Housing Association of New York, a real estate company that has the support of the city’s housing agency and tenant advocates made a bid to buy the 34 foreclosed properties. According to City Council Speaker Christine Quinn, New York Community Bank turned the company down, saying the offer was too low.
Schumer, along with Quinn and Congresswoman Nydia Velazquez, say that the FDIC — the federal agency that supervises financial institutions — should force New York Community Bank to come clean to buyers about the actual state of the finances, living conditions, and repairs needs of the buildings. Though no one has said it outright, the implication here is that the bank is fudging the numbers to make the distressed buildings more attractive to a higher bidder. The other implication is that the city has not had the pull with the bank that it would have wished.
The New York pols say that what they are asking for is well within the power of the federal agency. Because many of these mortgages were securitized by Wall Street, and are therefore implicated in the wider economic crisis, Schumer and Velazquez had inserted a section into the Dodd-Frank financial reform bill — passed by Congress last summer — that makes the federal government take some responsibility for the problem of distressed mortgages on multi-family dwellings, which afflict big cites like New York.
Schumer said today in a press release: “Here is a perfect example for the FDIC to take into consideration as they help build a framework for this program. The message here should be clear: residents of affordable buildings throughout the City should not be the victims of never-ending cycles of overleveraged gambling by predatory equity investors.”
This article from the Village Voice Archive was posted on April 7, 2011