City Officials, Housing Advocates Rally Against Predatory Lending Practices

In the Press

City Officials, Housing Advocates Rally Against Predatory Lending Practices

Council Member Brad Lander During the Press Conference Outside 294 Fifth Avenue
Brooklyn Daily Eagle
05/10/2011
PARK SLOPE — South Brooklyn Legal Services, along with elected officials and members of the Fifth Avenue Committee (FAC) and the Urban Homesteading Assistance Board (UHAB), held a rally yesterday in Park Slope to announce the filing of two separate motions arguing that mortgage holders can be held liable for maintaining building conditions once a foreclosure is initiated and a receiver is in place.

Also on hand were community-based agencies like Pratt Area Community Council, Tenants and Neighbors, Association for Neighborhood and Housing Development, Flatbush Development Corp. and Neighbors Helping Neighbors.

The housing advocates seek to draw attention to a major housing crisis across the borough — the rapid increase in over-leveraged multi-family buildings going into foreclosure.

They are demanding that banks commit to responsible lending practices and pledge to make their current over-leveraged properties available at true value to responsible non-profit buyers focused on affordable housing.

“We want all banks who lent irresponsibly, and who now hold mortgages on distressed multi-family buildings, to dispose of those loans according to a code of conduct, which includes selling only to responsible preservation purchasers at prices that reflect true values, which should include acknowledgment of a building’s rehab needs, and to ensure that conditions in buildings are well maintained during the foreclosure process,”said Michelle de la Uz, executive director of the FAC. which has been working to organize the tenants involved.

The first motion filed today was on behalf of a Park Slope building's six elderly and disabled tenants, who have lived with deteriorating conditions since the building's owner defaulted on a $1.85 million mortgage more than two years ago. In 2007, the owner paid $1.65 million to obtain the property despite the fact that income from the rent-regulated units would not be enough to sustain the mortgage let alone the needed maintenance and repairs. The mortgage holder, National Bank of New York City, later increased the mortgage to $1.85 million and also used the building as collateral on a separate $1.95 million mortgage. Not surprisingly, the owner allowed the building to fall into disrepair, and in November of 2009, the bank initiated foreclosure proceedings. Last September, the Court appointed a receiver who is charged with collecting rents and managing the properties; however, the income from rent collection is still not adequate to repair or maintain the building, and the receiver has refused to work with SBLS or FAC to reach any resolution.

"The conditions in the building would be unsafe even if the tenants were in perfect health, but given that they are severely disabled, suffering from mental disabilities and mobility impairments, the conditions are even more hazardous. It is gravely unjust for these tenants, some of whom are unable to leave their apartments, to be threatened by the conditions in the building, while the bank stands to reap the benefit of the ultimate sale of the building," said Shira Galinsky, Senior Staff attorney in the Housing Unit at SBLS.

The building in which some of these tenants have lived for more than 40 years currently has 96 outstanding housing code violations. The tenants have intermittent heat and hot water, no trash collection, an unsecured front door which allows vagrants into the building, and a roof that is in danger of collapse due to a recent fire which the tenants believe was caused by trespassers.

Martha Rivera has lived in the building for 41 years, is mobility impaired and is dependant on an oxygen tank. "I am 71 years old and have fibrosis of the lungs and anemia," she said. "Last winter our heat and hot water would go out for three weeks at a time. With it so cold, I would have to stay in bed with a quilt and the cold would hurt my lungs. Nobody should have to live like this, especially someone of my age and illness."

A second motion was filed on behalf of two tenants in a portfolio of four buildings in Sunset Park under similar duress. In this case, the mortgage-holder, Dime Savings Bank of Williamsburgh, approved a $3 million mortgage despite the fact that the rental income for the buildings was clearly inadequate to sustain such an amount. With little or no money for repairs and maintenance, the tenants have endured a sea of trash and refuse in the backyard, broken intercoms, rodents, bedbugs, mold, water damage, unsecured entrances and a host of other conditions which threaten their health and safety. Last year, foreclosure proceedings were initiated against the most recent owner, and since that time conditions have only deteriorated further. These four buildings have a combined total of 352 outstanding housing code violations, and one has been singled out by the Department of Housing Preservation and Development (HPD) as one of the worst-maintained buildings in New York City, and placed in the Alternative Enforcement Program.

"This building is a prime example of how speculators treat the market for multifamily buildings like a casino, but, when the bets go bad, banks let the buildings deteriorate," said Rep. Nydia M. Velázquez . "The Court motions being filed will send a clear message that we won't sacrifice tenants' rights to rampant greed and irresponsible speculation."

"This is about fairness. Struggling New Yorkers shouldn't pay for a bank's bad decision," said Public Advocate Bill de Blasio, who has submitted an affidavit in support of the lawsuit. "We cannot leave tenants in foreclosed buildings to fend for themselves as conditions deteriorate. Banks have an obligation to prevent their properties from falling into dangerous disrepair."

"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. We fully support the filing of these two motions where mortgage holders can be held liable for maintaining building conditions once a foreclosure is initiated and a receiver is in place. As before, the Council will continue calling on the FDIC to use its regulatory power to stop this prolific distressed housing problem - that is now spreading through our City."

"Lenders have placed thousands of low and moderate income renters at risk -- first, by over-leveraging multi-family buildings with too much debt, and then by failing to step up and take responsibility for building conditions," said City Councilmember Brad Lander. "The motions filed by SBLS today are an important step toward holding banks responsible for their actions and ensuring that tenants are living in decent, safe and sanitary housing. We also need to move forward on legislation that I introduced in the Council this spring that would require lenders to post a bond when they commence foreclosure proceedings, to address situations just like this one."

In both the Park Slope and Sunset Park cases, the tenants seek an order directing the receiver to make repairs as well as an order directing the bank to advance the necessary funds. The motions today are based upon the same legal theory as the precedent-setting Milbank case filed last year in the Bronx (Comm. 2006 v. NY Bronx I) . In that case, the Court ordered the mortgage-holder for a portfolio of ten foreclosed-upon apartment buildings to immediately advance $2.5 million for the repair of emergency conditions threatening the health and safety of the 400 Bronx tenants who lived there. The Park Slope and Sunset Park motions will mark the first time the theory is put to the test in Brooklyn.


Photo Credit: William Alatriste for the New York City Council

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