Assemblymember Hakeem Jeffries and State Senator Velmanette Montgomery usher in SONYMA-Insured Refinance of “Overleveraged” Apartment Buildings

by Gloria Dulan-Wilson

Governor David Paterson signed into law a legislation that Assemblymember Hakeem Jeffries has been working on for quite some time. The legislation will enable the state to help refinance apartment buildings facing severe financial difficulties, as a result of a massive housing crisis, brought on by greed and unscrupulous real estate deals, that aimed at pushing out families from low and moderate income neighborhoods, so that huge overpriced leviathans could be constructed.

Jeffries and the bill co/sponsor, State Senator Velmanette Montgomery, represent central Brooklyn districts where most of the multifamily buildings are located.

In fact 66 vacant or low occupancy buildings are in Jeffries district. It was the reason he sponsored the bill, making the announcement in his 2009 State of the District Address at Pratt Institute; and reiterating the necessity in 2010.

Assemblyman Jeffries said, "As a result of the housing market collapse, there are thousands of empty luxury condominium apartments all throughout New York City. At the same time, working families and middle class communities are being suffocated out of existence by the squeeze of the affordable housing crisis. By signing this bill into law, Governor Paterson has provided us with a powerful tool to help convert excess luxury apartment inventory into affordable homes for those most in need."

Many owners of rental apartment buildings in New York City acquired or refinanced during the housing boom have since fallen behind on their mortgage payments or defaulted. As a result, building services have not been maintained and the quality of life in those buildings has deteriorated.

The new law will allow the State of New York Mortgage Agency (SONYMA) to insure loans that refinance these "overleveraged" (read over priced) buildings that are now struggling to pay their debt service. The legislation signed by the Governor removes a requirement that refinancings of multifamily mortgages insured by SONYMA include renovation of the property. Under the new law, SONYMA will be able to insure refinanced mortgages of up to $150 million for properties originally financed between 2004 and 2008.

In addition, many recently-built, overpriced multifamily condo apartment buildings, erroneously designed to transform Brooklyn into the “new Manhattan,” remain unoccupied as developers have run into financial difficulties. Not only were the prices set so high that moderate income families could not afford them, in the long run they even proved to be too expensive for the Wall Streeters many of these units were designed to attract.

While the result has created eyesores that hover over the communities like giant ghosts, many long time Brooklyn residents are breathing a sigh of relief, as it appears that at least for now, rampant gentrification has been stopped in its tracks. At the same time, they are also wondering if any of these units will be made available for those who have been pushed out of their homes, or who have found housing prices to be so out of reach that they are stuck.

According the legislation, refinancing these buildings would allow rental properties to be properly maintained and enable unoccupied condos to be turned into affordable rental apartments. Actually, while this is a good thing, it would make better sense to make the condo units lease to own units, as oppose to rentals; so that the goal of home ownership could continue to be a viable option. It also expands the tax base, maintains pride of ownership, and builds a stake in the community. It is something that has been done successfully in other areas, and can work very well in this situation.

Upon signing the bill, Governor Paterson stated: "The housing crisis created many victims, including the tenants of apartment buildings that were often recklessly financed during the housing boom," Governor Paterson said. "This legislation will enable both rental and condo buildings to be refinanced so their tenants can help their communities grow and prosper."

Senator Montgomery, who has likewise been involved in the struggle to retain affordable homes in her district, stated: "From the roof of my district office I can see dozens of new luxury condominium towers standing empty, or so undersold their continued existence is in jeopardy. Thousands of empty units, many of which were built on sites where affordable and low-income housing was displaced so these new structures could rise. Failed buildings are disastrous for a neighborhood, so I was very happy when Assemblyman Jeffries approached me with his idea to save the neighborhoods, the buildings, and many units of affordable housing with this bill. I am proud to have carried it in the Senate. By signing this bill, the Governor can provide confidence and stability to the housing markets and our neighborhoods."

Majority Conference Leader John Sampson, D-Brooklyn, said, "In the current economic climate, people need adequate and affordable housing. I am proud that we have provided the tools necessary to refinance overleveraged apartment buildings and convert unfinished condos into affordable rental housing. This measure will improve the lives of everyday New Yorkers."

Brian E. Lawlor, President and CEO of "nyhomes," SONYMA's parent agency, and Commissioner of the Division of Housing and Community Renewal (DHCR), said, "We were proud to work with the Legislature and the Governor to craft legislation that will preserve affordable housing in New York. Strengthening communities is one of the core missions as we continue to integrate our agencies. We look forward to working with the development and lending communities to help refinance multifamily housing in distress."

SONYMA's Mortgage Insurance Fund was created in 1979 to provide insurance on multifamily mortgage loans for affordable housing made by commercial and public lenders.

The legislation signed into law continues SONYMA's efforts to help New York City neighborhoods put at risk by the financial crisis. The Mortgage Insurance Fund has already insured the mortgages of several unsold condo buildings that have converted to rental apartments. In 2009, SONYMA's single-family mortgage program lowered its presale requirement for potential homeowners looking to finance the purchase of condos located in "target" areas. "Target" areas are neighborhoods that are considered economically distressed. Under the new policy, only 40% of the units in a condominium development must now be sold for an individual condo to become eligible for a SONYMA mortgage.

Assembly Housing Chair Vito Lopez, D-Brooklyn, said, "This legislation is an important step toward resolving the critical issue of overleveraged apartment buildings in New York City. As Chairman of the Committee on Housing, I was proud to work closely with Assemblyman Jeffries, SONYMA and the Governor's office to ensure that we gain this critical tool to help us improve and protect affordable housing in the city."

Historically speaking, New York State, beginning in 1932, set a record in constructing the most quality, affordable homes for its residents, in the US. Many of these developments stand today, a testament to the efforts in New York to provide a home for all its citizens. Under the Pataki administration, the dismantling of affordable housing began, with many contracts going to his supporters to build what ultimately have become these overpriced properties standing empty today.

It could be said the reverse of New York’s affordable housing record was set between 2002 and 2008, when the most expensive, least affordable homes were constructed, and when the most families were displaced by unscrupulous, greedy developers, who are now crying crocodile tears, while many families are still facing homelessness as a result of their callous disregard for their well being.

Let’s hope that the legislation signed into law, and Assemblymember Jeffries and Senator Montgomery’s efforts in part mitigate some of what has been lost.

The other side of the line also has to be in rolling back those exorbitant rents that people have been forced to pay as the prices were driven higher and higher. Families forced to pony to rents of $1100 to $2000 or more a month, when their salaries are no where near that amount, need a break as well. Properties whose rents have been pushed above the $2000/mo mark, are decontrolled, leaving tenants at the mercy of landlords whose greed has long exceeded the need for increase.

Rolling back those rents in those properties by 35%, would make a great difference in their quality of life as well. With a rent guidelines board totally ignoring the fact that we are indeed in a recession, many are caught between putting food on the table or paying rent. It’s time to also turn attention to these victims as well. And I’m sure in the next weeks and months, this will indeed be the focus, returning Brooklyn to a real neighborhood, not the target of voracious overdevelopment by developers who are more concerned with their bottom line than the lives of thousands of hard working people.

Kudos to Assemblyman Hakeem Jeffries and State Senator Velmanette Montgomery for staying the course and striking the first blow. Kudos to Governor Paterson for signing it into law. More such diligence and legislation is needed to make New York liveable again. But this is definitely a great beginning.

Stay Blessed &
ECLECTICALLY BLACK
Gloria Dulan-Wilson