Banks, Advocacy Groups Turn The Screws On Borrowers

A number of commercial and investment banks that originate multifamily mortgages in the New York City area are working with a coalition of housing advocacy groups to pressure multifamily owners into repairing dilapidated buildings by tying new mortgages to the quality of an owner's entire portfolio of properties.

Housing Here and Now has inked an agreement with Citigroup and New York Community Bank that states that when a borrower applies for a mortgage on a multifamily property, the lender will evaluate the owner's and the building's track record, looking beyond financial means, said Chloe Tribich, point person for the initiative at Housing Here and Now. The banks are making changes to existing loan documents to reflect the agreement.

Going forward, participating banks could withhold a loan or increase pricing to pressure landlords into maintaining their properties properly. Banks can also require that run-down buildings and violations be fixed before closing on a mortgage. Banks will use records from New York's Department of Housing Preservation and Development and those of Housing Here and Now to find out about past housing code violations, emergency repair liens and litigation. The agreement applies mainly to affordable housing properties, Tribich added.

Participants hope that the initiative complements New York City's recent launch of the New York Housing Acquisition Fund as part of a larger focus on creating more quality affordable housing. Eight of the largest affordable housing lenders in the city have committed $125 million of a projected $160 million of debt needed to secure debt financing for the fund (REFI, 3/6). The loan portfolios of New York Community Bank and Citigroup together include more than 900 buildings and 66,000 units. The coalition is also in talks with 18 other lenders, Tribich added.

The coalition believes that banks will follow through with the agreement to avoid public pressure from housing advocacy groups to better vet affordable housing loans. The agreement has its roots in an agreement made last year with Bank of New York on its acquisition of an affordable housing portfolio, Tribich said.