90,000 NYC Apartments At Risk of Foreclosure

April 28, 2009 No Comments »


Up to 90,000 apartment units in New York City face the prospect of going into foreclosure, according to remarks from the commissioner of the Department of Housing Preservation Development.

Commissioner Rafael Cestero told the City Council Community Development Committee yesterday that 2.6 percent of the city’s apartments, up to 90,000 units, are in danger of foreclosure thanks to “predatory equity” practices carried out by private equity firms.

These investor groups essentially pool together private capital to purchase rent-regulated real estate in the hopes of speeding tenant turnover and sharply raising rents to current market levels when new renters come in.

But it looks as if their plans backfired, as many of the groups purchased city real estate at the height of the housing market, and now look set to cut their losses, potentially displacing many of the renters as a result.

The poor condition of the properties and potential foreclosures could wreak havoc on nearby properties as well, further dragging down apartment values.

That, of course, means a new class of investors could scoop up the distressed properties at an even greater discount and implement the same predatory practices, reducing the amount of affordable housing in the city, unless measures are taken to block the practice.

Renters have been the unfortunate victims of the ongoing mortgage crisis, leading to the creation of programs to protect tenants.

Mortgage financier Fannie Mae recently launched its so-called Real Estate Owned Rental Policy, which gives tenants of foreclosed properties the option to accept new month-to-month rental agreements or financial assistance if they choose to vacate.

RealtyTrac also launched a service that gives tenants early warning if the property they rent enters into default or is set to be foreclosed on by the bank or mortgage lender.

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