Serrano Urges Fannie Mae Not to Abandon Distressed Bronx Housing

After purchasing the $29 million dollar loan for these buildings in 2007, Fannie Mae later discovered that the loan did not meet its own underwriting standards. The previous owners of the buildings, a group called Ocelot Capital, abandoned the entire portfolio and left the buildings in a state of disrepair. Fannie Mae now wishes to sell the buildings’ mortgages through a competitive bidding process; however, Serrano and Schumer note that it could take over a year for new owners to take full control, which leaves the tenants in an uncertain position in terms of maintenance and necessary repairs in the interim.

“This is a serious situation and I feel that Fannie Mae has an obligation not to walk away from the table right now,” Congressman Serrano said this week. “We appreciate the actions Fannie Mae has taken so far, but these tenants are still a long way away from having responsible new ownership, and until a resolution is found I will urge Fannie Mae to remain in the picture and continue providing the necessary oversight and financial assistance we feel they owe to the residents of these buildings.”

The full letter is below:

Mr. Kenneth J. Bacon
Executive Vice President
Housing and Community Development
Fannie Mae
3900 Wisconsin Avenue, NW
Washington, D.C. 20016-2892

Dear Mr. Bacon:

We are writing to express our serious concerns regarding the pending debt sale of the mortgages which Fannie Mae holds on 16 buildings located in Bronx County, known collectively as the Ocelot portfolio.

As you know, under the current ownership these properties have been allowed to deteriorate into a state of extreme disrepair. The 400 unit Ocelot portfolio contains more than 3000 outstanding code violations as well as a number of extreme health and safety violations, which are well-documented and in many cases place the occupants at immediate risk.

While we are grateful that Fannie Mae has taken some initial steps to remedy this situation, including initiating foreclosure proceedings against the current owner, we feel strongly that Fannie Mae has an obligation to remain directly involved with this portfolio until such time that safety and stability have been restored to these buildings.

We understand that Fannie Mae’s current proposal is to sell the mortgages through a competitive bidding process to a restricted list of potential buyers, at least some of whom have been vetted by the New York City Department of Housing Preservation and Development (HPD). Unfortunately, we believe this proposal does not adequately address the dangers that continue to plague these properties and, in fact, would ultimately shift the responsibility for abating these conditions to both HPD and to the private affordable housing sector, an outcome which we deem unacceptable.

Neither HPD nor the affordable housing community should be held financially responsible for the deterioration that these properties have suffered since 2007 when Fannie Mae took over the mortgages. In addition, the substantial legal fees associated with foreclosure proceedings should likewise not be shifted to the private sector or local government.

Perhaps most importantly, Fannie Mae has acknowledged that foreclosure may take more than a year to complete. Whoever acquires the debt during this interim period would be in the uncertain position of having to either ignore the immense capital needs of these buildings, or identify and expend private funds in order to secure the health and safety of the residents.

I am certain you would agree that the first option of ignoring some of these abhorrent conditions is not acceptable considering the danger it presents to residents. After speaking with several interested parties and responsible housing practitioners in New York City, we have also concluded that the latter option is not a financially viable one and once again shifts the financial burden in a way that is not socially or fiscally responsible. It is therefore our position that the debt sale is not an acceptable means by which we can accomplish our shared goal of restoring these projects to decent, safe and sanitary housing—at least not in the near term.

For these reasons, we urge Fannie Mae to consider cancelling the debt sale and instead to return to the original plan of pursuing immediate foreclosure in order to gain title to these projects. Through this course of action we believe that these properties can be transferred to a responsible housing provider in the most expeditious manner.

If for whatever reason Fannie Mae feels that this not a viable option, then at a minimum, we urge you to establish a capital fund which can be used to maintain and improve building conditions until a foreclosure auction is complete and full rehabilitation plans can begin.

We thank you for consideration of this request and look forward to your response on this very urgent matter.

Sincerely,

Congressman José E. Serrano

Senator Charles Schumer