Tenants of Foreclosure Properties on Sale Suffer Most
Foreclosure properties on sale are spreading across New York City and tenants of apartments that have been foreclosed on are suffering the most.
In an old apartment building in Bronx, tenants have been enduring leaking pipes, cockroaches and electricity outages ever since the place was foreclosed and abandoned by its owners.
According to market data, as many as 100,000 apartments in New York City are foreclosure properties on sale or at risk of becoming one, including mega complexes and small buildings. Industry experts said that foreclosures are a result of the real estate bubble when developers paid large amount of money to purchase real estate in New York.
The developers were enticed to build more apartments when the city gradually phased out its laws on rent subsidy. The phase out of the subsidy laws allowed many landlords to demand market rents from apartment tenants.
During the peak of the housing market and credit boom, many developers built or purchased buildings with a plan to convert them into luxury condominiums and rentals. In addition, they had no problem acquiring financing because banks and lenders are more than willing to give out money to them.
But because of the languishing economy and increasing unemployment rate, many apartment units are not occupied or landlords were forced to reduce the rents in order to entice tenants. The trend took a toll on many landlords who saw their revenues are not enough to cover their mortgage payments, much more provide regular maintenance to their apartment buildings.
According to industry experts, many lenders are not keen on writing off troubled loans because doing so would greatly affect their bottom line. Additionally, it will also force them to allocate more funds to boost their capital levels, which is not a good thing to do in the current credit market.
One solution adopted by lenders is to seek for new developers who will assume troubled loans. However, the new owners cannot also boost the finances of distressed buildings, thus resulting to more foreclosure properties on sale.
Industry experts pointed out that there is a growing number of renters out there who are suffering from the foreclosure crisis when they did not take on any debt.
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