Renters becoming latest victims as foreclosure crisis widens
MULTIFAMILY DEFAULTS RISING
Some tenants left in dilapidated buildings
Monday, November 23, 2009
NEW YORK -- A new wave of foreclosures stands to hurt people who may have never taken out a mortgage: renters. In cities such as New York, Chicago and Los Angeles, where many investors are carrying upside-down mortgages on large rental buildings, some tenants are watching their homes fall apart along with the financing.
Janeia Sandiford, a 24-year-old GED student in New York, has two young children and a deteriorating apartment. When a leak over Sandiford's bathroom and kitchen caused the ceiling to flake off and then cave in, nobody came to fix it for a year, she said. She lacked heat most of last winter, and she has duct-taped her loose-fitting windows in place to cut down on drafts.
"I'm really worried about the kids," she said.
The real estate investment company Ocelot Capital Group bought the building where Sandiford lives and about two dozen others in the Bronx in 2006 and 2007. As the new owners struggled to keep up with payments, 10 of the buildings appeared on the city's list of most dilapidated rental properties in 2007 and 2008. Last winter, as Ocelot defaulted on its loans amid the deepening financial crisis, the buildings plummeted further into decline. Together, they racked up thousands of Code C violations --the most serious kind -- from housing inspectors.
Fannie Mae, which had bought much of the debt from the original lender, entered foreclosure proceedings for Sandiford's building early this spring. A state court appointed receivers.
In the meantime, the building on Manida Street has been beset by problems, according to tenants and their advocates, whose accounts were confirmed by the crumbling walls and damaged plumbing apparent on a tour of the property and its neighbor, also owned by Ocelot. Vandals stole the lock on the front door, giving squatters access to vacant apartments to sell drugs. Plumbing in the building was disrupted after the squatters broke through the walls and stole pipes to sell as scrap metal.
Similar conditions could crop up across the country this winter as foreclosures climb for large rental-unit buildings. In the first three quarters of 2009, 475 foreclosure proceedings were begun against multifamily rental or cooperative homes in the District, according to NeighborhoodInfo DC, a partnership between the Urban Institute and the D.C. Local Initiatives Support Corp. That figure already eclipses the 458 foreclosures for all of 2008.
In Chicago's Cook County, 328 multifamily rental buildings were in foreclosure by the second quarter of this year, compared with 185 last year, according to a yet-unreleased study by the Institute for Housing Studies at DePaul University.
In Los Angeles, foreclosures for buildings with five or more units totaled 78 -- encompassing 1,344 units -- in the first three quarters of 2009, compared with 49 buildings and 432 units over the same period last year, and 13 buildings and 239 units in the same period of 2007, according to the city's housing department.
In New York, housing analysts estimate that the number of apartment units in buildings at risk of default because of upside-down loans -- in which the property is worth less than is owed on the loan -- could range from 50,000 to 100,000.
And through the first nine months of this year, across the country, Fannie Mae had 74 foreclosed multifamily properties on the books, compared with 25 through the first nine months of last year.