NEW YORK, N.Y. – U.S. Representative Ritchie Torres (NY-15), a member of the House Financial Services Committee, today joined non-profit affordable housing advocates to warn that an improper fire sale of loans from the unsold real-estate portfolio of the now failed Signature Bank could endanger 80,000 multifamily housing units across New York City and significantly impact the preservation, affordability, and availability of affordable housing units across the city, particularly in low-income and disadvantaged communities where the need is especially high.
They also called on federal regulators to engage with state and local housing leaders before any of the loans in question are sold. Specifically, in a new letter sent to the Hon. Martin J. Gruenberg, Chairman of the Federal Deposit Insurance Corporation (FDIC), Rep. Torres is requesting a meeting with him and the Commissioner of the New York City Department of Housing Preservation and Development to review the loans within Signature’s real estate portfolio and discuss how they can work together to prioritize the needs of residents and New York City’s affordable housing market.
“The collapse of Signature Bank is not just a banking crisis. It has the potential to become a housing crisis,” said Rep. Torres (NY-15). “Signature Bank was the third largest real estate lender in New York City, and our concern is that the improper sale of its residential real-estate portfolio could have a detrimental effect on the affordability and quality of up to 80,000 units and endanger the stability for tenants, including children, seniors, families, and essential workers. We must ensure that the FDIC sells this debt to aresponsible buyer who’s committed to preserving quality affordable housing and not a bad actor who will prioritize displacement and disinvestment.”
According to Wall Street Journal, Signature Bank at the end of 2022 held more than $33 billion in real estate loans and was especially active in New York City. In the wake of the bank’s historic collapse last month – the third largest in American history – the FDIC has reportedly hired a private firm, Newmark Group, Inc., to help sell about $60 billion of Signature’s loans.
However, it remains unclear what exactly will happen to the billions of dollars in loans in Signature’s unsold real-estate portfolio, who might ultimately end up purchasing them, and whether a buyer will be committed to prioritizing the needs of residents, making necessary building repairs, and maintaining affordability. This has led to a great deal of concern and uncertainty among New York City affordable housing advocates given Signature’s significant presence in an already challenged housing market.
“Hidden beneath the headlines of bank runs and toxic assets are thousands of New Yorkers depending on regulators and elected officials to manage the fallout from the Signature Bank collapse and ensure their homes are properly maintained in the long run,” said Rachel Fee, Executive Director of the New York Housing Conference. “We saw in the aftermath of the last banking crisis how failing to proactively address distressed housing loans has a material impact on people’s homes – and with more than 80,000 units, the vast majority of which are rent-stabilized, hanging in the balance, we cannot afford to repeat the mistakes of the past. The FDIC must avoid a fire sale and take the time to ensure Signature’s multifamily housing loans are sold to a responsible, regulated entity and that disposition of loans for buildings showing signs of financial and physical distress are done in consultation with the City’s housing agency.”
“University Neighborhood Housing Program supports Congressman Torres’s efforts to make sure that the more than 470 buildings in the Bronx with Signature mortgages and the more than 19,500 families that live in those buildings are taken into consideration as the FDIC takes its next steps,” said Jim Buckley, Executive Director, University Neighborhood Housing Program. “It is essential that the FDIC work with local housing officials and community organizations to ensure that the mortgages are dealt with responsibly and that the buildings are maintained in good condition.”
Currently, loans from Signature’s unsold real-estate portfolio encompass approximately 3,000 multi family properties and close to 80,000 units across New York City. That includes more than 470 properties and 19,750 units in the Bronx and 273 properties and 11,173 units in the 15th Congressional District. Approximately 4% of Signature’s overall unsold real-estate portfolio is considered “distressed.”