City will call on FDIC to use its power to force bank to evaluate deplorable living conditions and disclose necessary repairs

BRONX, NY, April 7, 2010 – Speaker Quinn, Bronx Borough President Ruben Diaz, advocates and tenants today gathered in front of a Bronx housing development where tenants are suffering deplorable and dangerous housing conditions.

The Speaker and advocates called on the FDIC to mandate that New York Community Bank evaluate the finances and living conditions at 34 Bronx buildings in foreclosure, and then disclose information on necessary building repairs.

Tenants at the portfolio have been suffering for months living in conditions without adequate heat and hot water, sustained toxic mold outbreaks, leaky roofs and horrible rodent infestation.

“We cannot continue to let faceless banks make unfair deals at the price of tenants’ lives,” said Speaker Christine C. Quinn. “These are not just buildings, but homes – homes where people expect to get heat and hot water and basic living amenities. With the City’s hands tied, the Federal Government has an opportunity to step in and slap these irresponsible banks with the type of regulation that can not only save tenants, but help solve the prolific distressed housing market.”

“The Council has been working tirelessly to protect tenants in overleveraged buildings,” said Council Member Erik Martin Dilan, Chair of the Housing and Buildings Committee. “We are asking our federal partners to work with us and calling on the local banks not to work against us.”

A responsible buyer, the Mutual Housing Association of New York (MHANY), who had the support of both the tenants and HPD made an offer to NYCB last month in hopes of rescuing the distressed portfolio, but was flatly rejected because, according to the bank, the offer was too low. Despite repeated requests by the Speaker and HPD, NYCB has refused to disclose the full details of the transaction.

“These buildings may be assets to the banks, but to many people they are home,” said Congressman José E. Serrano. “Banks and regulators must ensure that the value of the buildings on their books reflects the true condition of the property and the needed repairs. In the meantime, they must do the maintenance needed to keep the buildings safe and secure for tenants.”

“Congresswoman Velazquez and I worked tirelessly to ensure that a federal multifamily mortgage resolution program be included in the passage of Dodd-Frank that would authorize our federal partners – including the FDIC – to create a comprehensive model for preserving affordable housing throughout New York City,” said Sen. Charles E. Schumer. “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.”

“The health, safety and well-being of the tenants in our communities should always be our highest priority, and when banks place their financial needs over those of hard-working families they are doing a disservice to us all,” said Bronx Borough President Ruben Diaz Jr. “We are calling on the FDIC to stand up for working families in the Bronx and stop New York Community Bank from profiteering at the expense of Bronxites, all while their buildings fall apart around them.”

The dumping of distressed mortgages is a part of a larger epidemic that could have serious consequences for housing conditions across the city. NYCB has a comparatively large portfolio of distressed loans, including mortgages on 328 buildings — serving more than 6,000 families — with more than 3 outstanding B and C violations per unit which present serious health and safety risks. Of these mortgages, 34 of the buildings, home to 800 families, are currently in foreclosure and at risk of further speculation and physical distress.

“NY Community Bank is one of the worst offenders in an industry fraught with bad actors; the victims, sadly, are the City’s most vulnerable people – low and moderate income families – making the bank’s behavior even more reprehensible,” said Ismene Speliotis, Executive Director of MHANY Management Inc. “The unfortunate reality in addition to this is that these situations are both preventable (if bank actually inspected buildings and reviewed owners prior to making loans) and fixable – if they sold notes and mortgages to responsible affordable housing developers.”

“At LISC NYC we know only too well the negative impacts that a single troubled building can have, not only on the tenants forced to live in dangerous and unhealthy conditions, but also on the block and larger neighborhood,” said Denise Scott, president at NYC LISC. “Banks that hold debt on physically deteriorating buildings have a responsibility to help address these problems – instead of simply passing the problems on to the next speculative buyer and, ultimately to the City of New York. Given the key role that New York Community Bank plays in multifamily lending in NYC, it is especially important that they enforce the ‘good repair’ clause in their mortgages, and engage in a good-faith dialogue with mortgagors, HPD, and qualified preservation-oriented developers about long-term preservation solutions.”

Overleveraged and physically distressed buildings put tremendous pressure on the city housing agency, which, despite limited resources, invariably must step in and make the necessary repairs in order to bring relief to tenants. In addition to the buildings currently in their portfolio, in July of 2010, NYCB sold distressed mortgages on 17 properties, five of which were in the City’s Alternative Enforcement Program. The 17 building are comprised of 334 apartments with an outstanding 3,146 code violations.

“New York Community Bank is currently the most active provider of multi-family loans in New York City, and this makes their actions important to the health of our city’s housing stock,” said Benjamin Dulchin, Executive Director at ANHD. “Unfortunately, New York Community Bank’s underwriting policies appear to make their loans – and our communities – more vulnerable to overleveraging and distress than loans made by their peer institutions. And the fact that the bank was unwilling to mitigate the damage of a bad loan related to the NYAHA Portfolio is a further cause for concern.”

By forcing New York Community Bank to evaluate its financial information, the bank would have to report its loans in foreclosure, building conditions and plans for repairs. This is essential because when the buildings are sold, this will create a level of transparency so the new landlord or owner will understand the true value of these buildings and will have the knowledge to appropriately restore these buildings to livable conditions.

“NYCB gives money to slumlords, like my landlord Martin Carlin, who owns 1380 University Avenue. They don’t even check to see if the landlord owes money to the city or is doing repairs. In my building, NYCB gave Carlin a $25 million loan for a 144 unit building,” said Barbara Williamson, President, 1380 University Tenant Association/CASA member. “That’s almost $180,000 of debt per unit. And we don’t see any of that money put into the building for repairs. We have over 500 violations on our building. We’ve had meetings with NYCB, they’ve come to the building and seen the conditions. They know our building needs serious repairs, they saw the flooded boiler room and the non-working elevators, and they haven’t pushed Carlin to do anything. It took us going on rent strike to get our intercom system fixed. I don’t understand why NYCB keeps getting away with bad lending practices.”

The City is calling on the FDIC to take these actions because it is the regulator for NYCB. In addition, Senator Charles Schumer and Congresswomen Nydia Velazquez sponsored a legislative amendment to the Regulatory Reform Bill which passed last Summer. The amendment calls on the FDIC, and other federal agencies, to craft a program to help bring financial and physical stability back to at-risk multi-family buildings that are overleveraged.