Housing News

More Troubles at Fannie Mae

How this mortgage giant stirs its own controversy

Who ever thought even a government agency would still fail short of its simple responsibility? Recently, Crains New York posted that Fannie Mae was asked by Bronx Judge Cynthia Kern to answer allegations that the office has neglected three buildings and allowed them to fall into disrepair. A lawyer, Marc Landis, is adamant at pursuing the case against Fannie Mae. Landis manages the three buildings under receivership.

The report further explains, “Mr. Landis wants the court to order Fannie Mae to fork over the $324,475 that he estimates is needed to conduct basic repairs at the three five-story residential buildings. He says he has only about $4,000 in an operating account and nearly $20,000 in outstanding bills on the properties, which have hundreds of outstanding citations from the city. Two of them are on the city’s list of worst-kept properties.”

The report also adds that at “least 11 other properties (are) also in foreclosure, all of which were purchased at the height of the boom by real estate investment firm Ocelot Capital for $36 million. Fannie Mae purchased the $29 million mortgage from Deutsche Bank and then discovered the loan didn’t meet its underwriting standards. The buildings were subsequently abandoned by Ocelot, and the loans—still held by Fannie Mae—went into foreclosure in March.”

This makes me think that either Fannie Mae has inadvertently neglected its duties or it wants to reflect its consecutive quarterly losses that it can’t maintain its properties anymore. I’m also thinking about the possibility that it delays any plans of fixing the situation in order to have a buyer shoulder the repair costs. It’s unfortunate however that Landis has decided to file a case against them. On November 23, the public will hear Fannie Mae’s answers.

One more interesting point is that an Israeli buyer was reportedly expressing its intention of acquiring the 14 properties. Venator Capital principal Sam Suzuki who is in contacts with the buyer however is facing strong opposition from real estate groups because of his controversial real estate dealings before. But he comments, “Our capital can’t wait forever. We are looking at other deals, and we’ll buy something else.”

Just how absurd does this sound to real estate professionals? Suzuki is at his take-it-or-leave-it stance and anyone who’s in this business would know that in a situation like this (the buildings have gained publicity already), there’d be more buyers who can match his buyer’s price. At this moment, his attitude just won’t work.

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