2009-05-20, 11:16

Awaiting the impact of mortgage reform legislation on multi-family housing

By: Multifamily Real Estate Industry Team
The Congress is currently working to conference an omnibus mortgage reform and foreclosure prevention of sorts. The teeth of such legislation can be found in H.R. 1728, passed by the House on May 7th, and S. 896, passed by the Senate on May 6th. Both bills initially drew moderate attention from the multi-family industry, but it is a pair of floor amendments that became a part of the House version that has many in the multi-family industry contacting their Members of Congress.

The first of these, offered by Rep. Nydia Velazquez (D-NY) as part of a larger sundry amendment sponsored by Rep. Barney Frank (D-MA), would provide the federal government with the ability to identify “at risk” multi-family properties, initiate bankruptcy proceedings, and potentially sell said property at a lower price to an entity that agrees to convert the foreclosed multi-family property into affordable housing. (The full language, Entitled “Title IX – Multifamily Mortgage Resolution,” can be found beginning at the bottom of the second column at http://frwebgate.access.gpo.gov/cgi-bin/getpage.cgi?dbname=2009_record&page=H5347&position=all) Regardless of any positive intentions, the multi-family industry is particularly concerned about the uncertainty created by the lack of clearly defined guidelines in identifying what constitutes a property as “at risk.” It should be noted that a similar amendment was offered by Sen. Charles Schumer (D-NY) and later withdrawn. It is unclear, however, whether there is enough opposition to keep such language out during a conference. Rep. Vasquez’s statement on her involvement in H.R. 1728 is available on her website at http://www.house.gov/velazquez/newsroom/2009/pr-5-7-09-predatory-lending-reforms.html.

The second amendment that has garnered the full attention of the multi-family lobby is an amendment offered by Rep. Bob Filner as part of the aforementioned Frank sundry amendment. Found here under “(c) Landlord Notice to Tenants” in the third column of http://frwebgate.access.gpo.gov/cgi-bin/getpage.cgi?dbname=2009_record&page=H5345&position=all, apartment owners would be required to notify current and prospective tenants any time a property is in default or foreclosure. This would be the case regardless of individual state renter protections that already exist.

In the meantime, as your Members of Congress work to iron out language to ensure passage of a final bill aimed at mortgage reform and foreclosure prevention, organizations like the National Multi-family Housing Council have implemented a full court press on these two issues within any such legislation (http://www.nmhc.org/Content/ServeContent.cfm?ContentItemID=5236

(This entry posted by Fritz Vaughan, a member of Womble Carlyle's Government Relations team)

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