promised to stop rents from rising<\/a> on New York’s roughly one million rent-stabilized apartments. Critics protested that the freeze would cause landlords to fall behind on their mortgages, raising the loans’ risk of delinquency or even default.<\/p>\nNow that Mamdani is mayor, banks appear to be taking that danger seriously.\u00a0<\/p>\n
“Every bank is focused on it,” Feddie Strickland, an analyst at Hovde Group who covers banks in the Eastern U.S., told American Banker. “Any bank that lends in multifamily in the greater New York City area is going to have some disclosures \u2026 about what the rent-control multifamily exposure is.”<\/p>\n
Since taking office, Mamdami has appointed six people to the city’s nine-member Rent Guidelines Board, which will take a final vote on the rent freeze on June 25. Rent-stabilized apartments, which would be subject to the freeze, make up about 44% of all rental properties in New York.<\/p>\n
As the Board deliberates, banks are preparing in different ways.<\/p>\n
OceanFirst Financial, a New Jersey-based lender with $23 billion of assets, announced on Monday that it is selling off $1.4 billion of multifamily real estate loans. The bank did not explain its motivation for the sale, but in a press release pointed out that the move would, “importantly, eliminate the majority of the bank’s exposure to rent-regulated properties in New York City.”<\/p>\n
OceanFirst did not say to whom it was selling the loans or what price it was receiving for them, though it did say that the “agreed purchased price is consistent with initial valuation estimates” that it previously disclosed.\u00a0<\/p>\n
OceanFirst acquired the multifamily loans as part of its recently completed purchase of Flushing Financial. When that deal was announced in December, OceanFirst said it was applying a 10% mark, inclusive of both cracks in credit and interest rate shifts, on the rent-regulated multifamily portfolio.<\/p>\n
OceanFirst declined to provide an interview on Monday, but told American Banker in a statement that more details will be disclosed in its next earnings report.<\/p>\n
Another case is Hanover Bancorp, a $2.4 billion-asset bank based in Long Island. The bank has reassured investors that it has “successfully moved less desirable rent-controlled multifamily loans off the books,” Strickland wrote in a research note.<\/p>\n
But for the most part, unlike OceanFirst, Hanover is not offloading these loans by selling them.<\/p>\n
“They’ve got a good bit of maturities coming up, and they’ve had some maturities over the last couple quarters,” Strickland said in an interview. “What they’ve been doing is just proactively reaching out to these borrowers, getting updated financials, and if they don’t love the loan, they’re helping them find somewhere else to finance.”<\/p>\n
That case-by-case approach, Strickland said, is common among the banks he covers; many are reaching out to borrowers one by one to make sure they can handle a potential rent freeze. If they can’t, they work out a solution.The fact that lenders are taking action at all reflects the reality that banks, or at least their investors, see the rent freeze as a real threat to rent-regulated multifamily loans.<\/p>\n
“It’s likely that you do see some level of increase in delinquencies over time,” Strickland said. Also, he added, “You have the headline risk.” Investors have heard about rent-regulated multifamily loans, “and the prospect of a rent freeze doesn’t sound great,” he said.<\/p>\n
As Mamdami has vowed to freeze rents, landlords have protested that this would make it impossible for them to keep up with rising taxes, utilities and other costs of owning property.<\/p>\n
“How can anyone with a straight face say 0%?” Chris Athineos, a landlord in Bay Ridge, Brooklyn, told New York’s WABC-TV<\/a>. “Water and sewer are outrageous increases. Insurance is through the roof. Everything goes up, but the rents are supposed to be flat.”<\/p>\nOn the other hand, researchers at Moody’s Investor Service found that the policy’s impact may be smaller than some critics predict. According to a recent report by the credit ratings agency, even a five-year rent freeze would only put 6% of New York landlords at risk of defaulting on their loans.<\/p>\n
Strickland, for his part, believes the impact on banks will be minimal as well, mostly because they’ve had time to prepare.<\/p>\n
“It’s not like this is a sudden crisis,” he said. “This is something that we’ve all seen coming for a while.”<\/p>\n","protected":false},"excerpt":{"rendered":"Processing Content Key insight: Banks are taking different steps to reduce their exposure to rent-regulated multifamily loans in…\n","protected":false},"author":2,"featured_media":260359,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[8096,59982,101198,9,56,63,65,64,35900],"class_list":["post-260358","post","type-post","status-publish","format-standard","has-post-thumbnail","category-new-york-city","tag-city-of-new-york","tag-commercial-banking","tag-commercial-real-estate-loans","tag-new-york","tag-ny","tag-nyc","tag-nyc-headlines","tag-nyc-news","tag-risk-management"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts\/260358","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/comments?post=260358"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts\/260358\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/media\/260359"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/media?parent=260358"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/categories?post=260358"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/tags?post=260358"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}