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The Buck Stops…There: Chuck Schumer, Fannie Mae, and The Bronx
October 29, 2009 by Neil · Leave a Comment
Sen. Chuck Schumer is pushing Fannie Mae to have an expedited auction of 14 dilapidated properties in the Bronx.An auction had originally been scheduled for 25 separate Bronx apartment buildings owned and abandoned by the same principal. Fannie Mae wants to sell the 14 buildings to the highest bidder in a competitive bidding process. Schumer’s contention is that such a strategy could take more than a year, and would shift the responsibility for maintaining the violation-ridden properties to the city and affordable housing groups. This would cost New York taxpayers’ money in the interim. Schumer, understandably, wants to shift the burden to the new buyer, who would then be obligated to remove the violations expeditiously.
This problem epitomizes the problem with the toxic multifamily assets on the banks’ books. They need to be purged and sold quickly in order to establish price points for the marketplace. To say that trading of apartment buildings in New York is anemic now is to give a bad name to sickle-cell sufferers. Buyers with funding sources and appetites for properties complain to me on a regular basis that the bid-ask gap is a chasm. (OK, they don’t actually use the word ‘chasm,’ but they should.) Their other big complaint is that banks are only lending at attractive terms and rates on about 50-60% LTV. That does not get them to the Promised Land.
Schumer should take the lead in encouraging banks to purge their toxic assets upon pain of charter revocation. Then, he can use his power on the Finance Committee to decide whether to break or bust the banks. Multifamily Investor takes a very dim view of such a wide-eyed hope, but Multifamily Investor can dream…
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