Mayor de Blasio, U.S. Senator Schumer Announce Purchase of Distressed Home-Owner Mortgages from Federal Government as City Moves to Stabilize Neighborhoods Not Yet Recovered from Mortgage Crisis

June 30, 2016

Community Restoration Program allows City to fund the purchase of two dozen distressed mortgages for properties located in four NYC boroughs with a goal of keeping New Yorkers in their neighborhood

Mortgages purchased with $1 million from the City Council, $7 million in private financing from Goldman Sachs, and a grant of more than $5 million from funds received through bank settlements obtained by the New York State Attorney General

NEW YORK—Mayor Bill de Blasio; U.S. Senator Chuck E. Schumer; Council Speaker Melissa Mark-Viverito; Council Members Daniel Garodnick, Daneek Miller and Donovan Richards; a number of not-for-profit organizations; and Goldman Sachs as financing partner, today announced the purchase of 24 distressed mortgages for one- to four-family homes – with a total of 41 residential units – in the Bronx, Brooklyn, Queens and on Staten Island. As New York City continues to fight to keep homeowners impacted by the mortgage crisis in their homes, the acquisition, through the new Community Restoration Program, marks one of the first times a municipality has stepped in to purchase distressed Federal Housing Administration (FHA) notes that would otherwise have been sold at auction to the highest bidder.

“We are fighting to help homeowners stay in the neighborhoods they helped build. And we won’t let predators force them out,” said Mayor Bill de Blasio. “The Community Restoration Program is the first of its kind, and it puts government squarely on the side of struggling families so they can keep their homes.”

Housing Preservation and Development Commissioner Vicki Been said, “Helping homeowners stay in their homes is a key way to preserve the affordability and stability of our neighborhoods. While many families are still struggling in the wake of the mortgage crisis, this innovative approach offers a lifeline for them and their communities. I want to thank our amazing partners, from Attorney General Schneiderman, who has stepped in to help homeowners in New York City and across the state, to our City’s elected officials, the banks working with us, and, critically, our dedicated non-profit partners who create the bridge to a better future for everyone.”

“Preserving affordable housing is essential for the health of our families and the economic strength of our communities and that’s why New York City’s Community Restoration Program is so important. The acquisition of two dozen distressed FHA-insured mortgages will undoubtedly help keep New Yorkers in their homes and neighborhoods throughout New York City. Thank you to Mayor de Blasio and all of the partners involved in what is the first-ever effort of its kind by a municipality,” said U.S. Senator Charles E. Schumer.

“With this program, New York continues to lead the path forward in our collective efforts to rebound from the depths of the foreclosure crisis,” said New York State Attorney General Eric T. Schneiderman. “It’s one more tool in the City’s and State’s arsenal for preserving affordable housing and helping homeowners still reeling from the housing crash. It makes sure that the settlements my office secured from banks are used to mitigate the damage they caused. And it ensures that distressed mortgages don’t end up in the hands of the highest bidders whose goal is to profit off other people’s losses. My office is proud to partner with the City and our non-profit partners in this innovative program that helps balance the scales of justice.”

Council Speaker Melissa Mark-Viverito said, “The New York City Council is proud to support the Community Restoration Program, a groundbreaking initiative that will keep more New Yorkers in their homes and create more affordable housing for working families. Many of our neighborhoods are still on the long road to recovery after the collapse of the housing market; by stepping in and purchasing distressed mortgages, the City is creating viable solutions for homeowners and preserving rental opportunities for communities who need them most. The Council’s $1 million investment in the Community Restoration Program is part of our long-term vision for a city that everyone can call home, and I thank HPD for its important work on this issue.”

“HUD welcomes the opportunity to work with government entities and not-for-profits like the City of New York and its partners,” said Holly Leicht, HUD Regional Administrator for New York and New Jersey. “This note sale will enable the City to provide mortgage relief to homeowners in need and will help stabilize neighborhoods hit hardest by the foreclosure crisis.”

"Zombie properties, ones left abandoned and in the legal limbo of foreclosure, must be maintained by banks thanks to a law I passed in Albany. Now, no neighborhood will be marred by abandoned properties with shattered windows, falling facades and opened doors. I'm equally proud that the Independent Democratic Conference proposed and passed the Community Restoration Fund on the state level which will help non-profits, municipalities and land banks purchase homes from federally distressed pools. With the city's Community Restoration Program we can continue to rid our neighborhoods of blight and preserve the dream of American homeownership. It's a great day when we can keep families facing foreclosure in their homes," said State Senator Jeff Klein, leader of the Independent Democratic Conference.

"Staten Islanders and Brooklynites know first-hand just how damaging the foreclosure crisis has been to communities throughout New York. I was proud to champion the Community Restoration Fund in Albany, which was signed into law earlier this month. This law helps properties be rehabilitated and maintained, to help keep homeowners in their homes. Now, it's great to see this concept implemented within New York City, with two dozen distressed mortgages in four boroughs purchased through the Community Restoration Program. This first step will go a long way towards helping our city recover from this scourge," said State Senator Diane Savino.

"It is critical that we pursue every avenue to help New Yorkers remain in their homes," said Assembly Member Helene E. Weinstein, Chair of the State Assembly Judiciary Committee. “New York City’s Community Restoration Program is an important complement to our efforts on the state-wide level, including the newly created New York State Community Restoration Fund and the Zombie property maintenance program. These measures will help preserve homeownership and promote neighborhood stabilization. I commend Mayor de Blasio for this great step forward.”

Council Member Daniel R. Garodnick said, “The City Council sought to take direct aim at the mortgage foreclosure crisis, and then backed it up with allocations in the budget. Today's note purchase sends the message that government can be nimble and creative when solving complicated financing issues in defense of affordable home ownership. Thank you to Mayor de Blasio, Senator Schumer, HPD and our federal counter-parties for bringing it to fruition.”

“I am pleased to see the Community Restoration Program finally being implemented to help working families refinance their homes and get the support they need,” said Council Member I. Daneek Miller. “This is a national effort and it is great to see New York will be the first major City in the country to give homeowners this opportunity. Southeast Queens has one of the largest populations still recovering from the bursting of the housing bubble of 2008. With a limited number of options to help them get back on sound financial footing, this program will allow families to work with an organization whose focus is on helping them stay in their home, instead of making a profit, and keeping families in their communities. I would like to thank Mayor Bill de Blasio, Councilman Donovan Richards, Councilman Ruben Wills, and Councilman Daniel Garodnick, for supporting this program and giving residents the financial relief they need.”

“The purchase of these FHA notes in New York City is a victory for New Yorkers struggling to stay in their homes, as well as those who are searching for affordable homeownership,” said Council Member Donovan Richards. “This announcement is the culmination of years of hard work by my colleagues Council Members Miller and Garodnick, Mayor de Blasio, HPD, all of the nonprofits such as the Center for NYC Neighborhoods, and all of our colleagues in government across the nation who stood by us on our trip to Washington D.C. The foreclosure crisis is still prevalent throughout the country, particularly in communities of color, so it is a proud day for New York City as we are the first to acquire these homes and preserve them as affordable housing. I look forward to seeing this process repeated many times in cities all over America.”

The goal of the program is to preserve affordable homeownership and rental opportunities in neighborhoods that continue to have high rates of foreclosure and underwater loans. While the overall housing market in New York City is strong, a number of neighborhoods have yet to recover from the collapse of the housing market during the Great Recession nearly 10 years ago. Through targeted intervention in these areas, the program begins to address the negative economic and physical effects caused by distressed properties in foreclosure, while maintaining existing and creating new affordable homeownership and rental opportunities.

The program will serve as a model for cities around the nation seeking to purchase distressed mortgages from the federal government as a strategy for preserving affordable housing and stabilizing neighborhoods.

The $13 million program is being funded with $1 million in seed money allocated by the New York City Council, which is in turn leveraging $6.9 million in private financing from Goldman Sachs’ Urban Investment Group, and a $2.2 million grant from the Local Initiatives Support Corporation (LISC), a major national affordable housing group, that was funded by a bank settlement obtained by the New York State Attorney General, and $2.9 million in funds received from Morgan Stanley as part of their settlement obtained by the New York State Attorney General. The program is structured so that, as solutions are achieved for homeowners and properties, revenue and savings from the successful repositioning can be reinvested for future acquisitions of distressed notes from the federal government.

In 2015, HUD announced changes to the federal Distressed Asset Stabilization Program (DASP), giving the City of New York and other municipalities the opportunity to acquire pools of distressed FHA mortgage notes for one-to-four family properties located in their jurisdiction through a direct sale instead of through an open auction to the highest bidder. The federal government also announced that DASP would require bidders to achieve 50 percent neighborhood stabilization outcomes for the notes.

In response to the changes to the program, the City, in partnership with the Center for NYC Neighborhoods, MHANY Management, Inc., Neighborhood Restore Housing Development Fund Corporation, the National Community Stabilization Trust, and Preserving City Neighborhoods Housing Development Fund Corporation, created the program to acquire distressed FHA-insured mortgages. The program will strive to achieve neighborhood stabilization outcomes for 100 percent of the notes, far surpassing the 50 percent required by the federal government when distressed mortgages are sold at an open auction.

“The Community Restoration Program demonstrates how innovative partnerships that include government agencies, non-profits and mission-driven private capital can work together to stabilize families and neighborhoods,” said Christie Peale, Executive Director of the Center for NYC Neighborhoods. “This critical pilot will pass on much needed mortgage relief from the FHA’s distressed asset sale to homeowners and communities.” 

"MHANY is excited to be a part of this groundbreaking initiative and proud to partner with the other not-for-profit organizations and members of this team. We will do everything we can to ensure outcomes that maintain homeownership for current owners when possible – and we will stabilize the community where these homes are situated 100 percent of the time,” said Ismene Speliotis, Executive Director of MHANY Management, Inc. “It is important as this initiative goes forward that we not forget that families across New York City continue to struggle after the foreclosure crisis. Recovery has been uneven and many homeowners in low- and moderate-income neighborhoods of color have been left behind."

“Neighborhood Restore and its affiliate, Preserving City Neighborhoods, are honored to again be partnering with FHA, the City, Goldman Sachs’ Urban Investment Group and its non-profit partners in overseeing the transformation of financially and physically distressed properties into affordable community assets,” said Salvatore D’Avola, Executive Director of the Neighborhood Restore Housing Development Fund. “We hope this smart new program will become an essential tool in assisting homeowners facing foreclosure.”

After purchasing the notes, the non-profit partner organizations will do active outreach and work one-on-one with homeowners, providing counseling and identifying potential solutions to keep current homeowners in their home. The primary goal is home retention through mortgage modification or refinancing. When neither is feasible, for example if a home has been abandoned or a homeowner is not eligible for a modified loan, the fund will work to ensure that the homes are repositioned as affordable homeownership or rental housing opportunities.