Fannie Mae crimps Battery Park apartment sales

Fannie Mae crimps Battery Park apartment sales By Amanda Fung Published: March 25, 2010 - 1:58 pm Fannie Mae, which has tightened its lending requirements nationwide, has temporarily ceased to purchase individual mortgages for condos and co-ops in the Battery Park City area, according to sellers and brokers there. As a result it has become almost impossible to sell a condominium or co-op in the... [more]

Fannie Mae crimps Battery Park apartment sales By Amanda Fung Published: March 25, 2010 - 1:58 pm Fannie Mae, which has tightened its lending requirements nationwide, has temporarily ceased to purchase individual mortgages for condos and co-ops in the Battery Park City area, according to sellers and brokers there. As a result it has become almost impossible to sell a condominium or co-op in the waterfront neighborhood in lower Manhattan unless an all-cash buyer swoops in. It's unclear why Fannie Mae has stopped backing loans in that area. But some say it has something to do with negotiations regarding ground leases. Those discussions are ongoing between residents and the Battery Park City Authority, the public agency set up by New York state in the 1970s to develop and manage the 92-acre area. Battery Park City is the only neighborhood in Manhattan where residents have to pay rent for the land their buildings stand on. Each of the dozen or so buildings in the area has its own ground lease and provisions. Those ground lease fees, which are factored into residents' monthly payments, could more than double in two years as the leases expire in 2011. That potentially steep rise would have to be taken into account in the underwriting of loans in the neighborhood. It is unclear when Fannie stopped accepting loans on properties in the neighborhood. A Fannie Mae spokeswoman said it is currently reviewing terms of the ground lease agreements that exist in Battery Park City to determine whether they "meet our guidelines." “Battery Park City is getting hit hard. Underwriters consider the area a declining market,” said Richard Martin, a senior vice president of DE Capital Mortgage, adding that since the beginning of the year his company has failed to complete five to six transactions in the neighborhood. Even sales at older condo buildings in the neighborhood are being hit. Denis Timm's sale of his one-bedroom 800-square-foot condo at The Regatta, located at 21 South End Ave., fell through this week because the buyer was denied a mortgage. Mr. Timm's apartment, with an asking price of $485,000, has been on the market since last summer. “It is pretty outrageous,” said Mr. Timm, adding that he pays more than $2,000 in monthly charges for his apartment in the building. The Regatta is one of two condo buildings that pay the highest ground rents in the area and last year was one of the first buildings to negotiate with the BPCA to establish a 3% annual increase through 2023. “Unless someone buys without a mortgage it won't go through,” he said. Mr. Timm received a letter from his attorney stating that the buyer failed to get financing from CitiMortgage and Residential Home Funding Corp. because “the loan has been declined for failing to meet Fannie Mae guidelines.” The letter went on to state that Fannie “has temporarily ceased accepting loans in the Battery Park area while they re-review the ground leases there.” “I've failed to make deals in the area because of this,” said Terry Lautin, a broker at Prudential Douglas Elliman. The last deal she closed in Battery Park City was in December 2008 and it was an all cash deal, she noted. “Those are the only deals closing,” Ms. Lautin said, adding that high-net-worth individuals may also be able to get financing from investment bank relationships. “Sales will be stagnant in the area for the near term, at least until a bank with some lending capacity comes in to lend there,” said Mr. Martin. According to StreetEasy.com, condo and co-op sales in Battery Park City have been down by as much as 76% since October 2009 from the previous year. Last month, sales fell roughly 59% from February 2009. Meanwhile, sales have been improving across Manhattan as a whole. Condo and co-op sales were up roughly 61% last month from the same period last year. According to residents, the BPCA has been meeting with Assembly Speaker Sheldon Silver to discuss and negotiate the ground leases for about 10 buildings, where more than 2,000 residents live. Battery Park city was created from landfill from the construction of the World Trade Center towers. [less]