rare Manhattan coop foreclosure set for Broome Street loft

bring an artist certificate?
A couple of story lines intersect on Broome Street this month. The first has to do with the dip in foreclosures in New York City since 2009 and their relative scarcity in Manhattan; the second has to do with the real-world impact of the Soho Artist In Residence rules. With a foreclosure auction on a loft coop shareholder at 426 Broome Street scheduled for January 24, these story lines intersect, tragically, for one long-time Soho resident.

Queens is a leader (but does not want to be)
The Real Deal posted an article last night (based on Property Shark data) about the dip in foreclosure activity from 2009 to now, with a side note about how rare foreclosures are in Manhattan. Manhattan had just 6% of the foreclosures scheduled in the city in the last quarter of 2010.

As states across the country investigate foreclosure-law compliance and court dockets swell with lawsuits alleging flawed paperwork and wrongful foreclosure, banks and mortgage servicers are proceeding more cautiously in initiating foreclosure actions.

The chart in the article shows that most of this story is set in Queens, as the lion’s share of foreclosure activity in the city has been in Queens, and the “dip” from 2009 to now is also a largely Queens phenomenon, with the other boroughs representing roughly even numbers of foreclosures over the last two years or so. Granted, Queens has the largest population and the highest concentration of owner occupied units, but the predominance of foreclosure activity in Queens is still disproportionate; you’d think that predatory loose troublesome STRIKE lending practices would have been as prevalent in Brooklyn, for example, as in Queens, but the foreclosure numbers in The Real Deal do not bear this out.

I am sure there are explanations or analysis of this curiously Queens-centric phenomenon available on the web; someone more interested in the Outer Boroughs than Manhattan Loft Guy should check that out. I will add only a few data points from the 2008 Housing and Vacancy Survey by the U.S. Census Bureau that I have referred to a couple of times recently (December 14, Wall Street Journal oversells a Manhattan 4 bedroom “boom”, and December 15, not news, data: Manhattan coops outnumber condos 3:1, but rentals outnumber both 3:1), the fabled Table 14 of which shows that 46% of Queens households are owner-occupied, compared to about 25% in Manhattan and about 28% in Brooklyn. Yet The Real Deal chart shows that — even at a much reduced volume — Queens had 49% of the scheduled foreclosures in the Fourth Quarter of 2009, compared to Brooklyn at 19% and Manhattan at 6%. Staten Island is by far the leader on a foreclosure-per-household basis, but let’s not get any farther afield….

The Real Deal gives percentages and offers that chart of new foreclosure auctions scheduled by borough, by quarter, but the numbers at the low end are hard to estimate. Manhattan’s share seems to have ranged from about 40 to about 15 per quarter over the last two years, and the conventional wisdom has been that very few of the Manhattan foreclosures have been of coop units.

The number of coop units in foreclosure that are subject to A.I.R. rules must be vanishingly small, so the owner of the shares for the Manhattan loft #5R at 426 Broome Street may be as rare as she is unfortunate.

situation is bleak, details are scarce
If this Property Shark page comes through (it probably won’t unless you have an account), click on opposite under . If not, take my word that there’s not much information for this foreclosure. No Index Number for the lawsuit, no location for the auction (probably the New York County Courthouse), a date (January 24) but no time for the “scheduled auction”. The mortgage holder is “CitiMortgage, Inc. “et al” and the amount is $222,106. The owner has had a mortgage on the loft since at least 2001.

My knowledge of the details of foreclosure practice is limited, but I am pretty sure that if the matter has gone so far as to have an auction scheduled, the process is nearly done. In other words, if there were issues to be raised about robo-signing, missing documents, or other lender misconduct in the foreclosure process, they should have been raised by now. (The New York Times posted an article on-line just this afternoon about 2 Massachusetts foreclosures being overturned because they banks could not prove they held title at the time of the foreclosure.) All legal bullets having been shot (or held), the only solution (as I understand it) is monetary: unless the owner comes up with the debt ($222,106, and counting) before the auction, the banks will sell the coop shares to the highest bidder, keep enough for the debt plus expenses, and return the balance (if any) to the debtor. There should be a significant balance, which also strikes me as unusual for a foreclosure.

valuation is difficult
The coop has two buildings, 426 Broome Street and 428 Broome Street, is also known as 41 Crosby Street, but only one of the buildings has an elevator. Our building notes say the elevator is in 428, but the only sale in this coop in the  last 4+ years was #3F at 428 Broome, which was definitely marketed as a walk-up. That was “1,200 sq ft” of classic loft, in the sense that it was completely open, but featured a Waterworks bath, custom built-ins, and a kitchen with proper proper names. It closed at the asking price of $1.425mm on November 22.

The loft with the foreclosure auction scheduled for January 24 is #5R at 426 Broome, which does not look as though it has changed hands for at least 10 years (this owner put a mortgage on in 2001; amount unknown). Chances are, it is in primitive condition.

former purchase process was beyond reasonable
This is a long-time (circa 1978) self-managed coop with ridiculously low maintenance (#3F paid $360/mo last year). Back in the day (and possibly still), there was no formal purchase application, but the seller and buyer submitted a request to purchase and the buyer attended the next coop meeting. I imagine that questions came up from time to time, but there was nothing similar to the Naked Financial Submissions of typical Manhattan coops.

This coop has been a “waiver letter accepted” building in the past, regarding A.I.R.

is A.I.R. a real world problem for banks?
One of the issues mentioned in that NY Times article that prompted my series of posts on Soho and A.I.R. beginning with this one (November 12, did the NY Times just write the obituary for the Soho real estate market?) had to do with potential problems for a bank holding an A.I.R. property with a limited market:

But banks, which have been tougher on all kinds of borrowers as a result of the foreclosure crisis, are now skittish about giving loans in buildings that have an artist-in-residency requirement, said Eric Appelbaum, president of Apple Mortgage. Banks worry that if mortgaged apartments go into foreclosure, the artist rule may make them harder to resell.

I will be very curious to see how that pans out, if the foreclosure auction goes forward at 426 Broome Street.

© Sandy Mattingly 2011