Rent-stabilized owners suffer swell of foreclosures
Executive chair of Herrick and co-chair of the Real Estate Department, Belinda Schwartz, was quoted in The Real Deal discussing the state of the real estate market and recent foreclosure filings from rent-stabilized landlords in New York City.
The article highlighted that in 2022 industry insiders had initially warned that interest rates and operating expenses in rent-stabilized buildings were rising significantly faster than rent. Additionally, a new 2019 law blocked rent-stabilized landlords from increasing rent more than a "minimal amount." Landlords have expressed that due to mounting costs, buildings with few free-market units may be facing disinvestment and ultimately distress.
Belinda noted that there has been an uptick in banks and debt funds moving to foreclose this year compared to last, but banks' unwillingness to take back assets may stave off a bevy of foreclosures.
Banks are typically reluctant to repossess assets and the city's stagnant sales market has driven more lenders to extend-and-pretend on shaky loans, Belinda said.
The article explained that banks may work with owners to "sell struggling assets to a third party or take back the keys in a friendly foreclosure, or a deed-in-lieu of foreclosure."
"It's unclear, I think, whether there really will be a wave," Belinda said.
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