Talk Bronx New York

A Sickness on Wall St., Played Out in the Bronx 

With the $700 billion bailout package signed, sealed and delivered on Friday, the perils of a reckless financial era have come to an end — for some people.

Heading for school, Franco Mora stopped outside his building at 1530 Sheridan Avenue in the Bronx. From December until June, Mr. Mora and his neighbors had to cook on hot plates. The gas line needed to be fixed, and was, eventually.

Mr. Mora’s building was bought in February 2007 by a group of investors who spent $400 million to acquire 75 buildings in the Bronx. For 1530 Sheridan Avenue, which has 84 apartments, the new owners took out a mortgage of $5.4 million.

When the building had changed hands 30 years ago, the owner carried a mortgage of $338,000. When it was sold in 2001, the mortgage was $3 million. So with the 2007 sale, the debt on 1530 Sheridan Avenue was 16 times what it had been three decades earlier.

The Bronx — once the symbol for urban redlining — has gone from being starved of private investment to being engorged.

“In the 1970s, we were fighting to get money into the neighborhoods, to invest in housing,” said Jim Buckley, who has worked as a community organizer and housing advocate in the Bronx since the early 1970s. “But just throwing money at neighborhoods does not mean the neighborhoods are benefiting.”

For good and ill, more than half the apartments in the Bronx are rent-stabilized. That means the income for the owners is limited unless there is a big turnover of residents, since the law permits rents to increase faster after an apartment is vacated.

“We’ve been very concerned for several years about the standards the banks were applying,” said Mr. Buckley, the executive director of the University Neighborhood Housing Program. “It’s a strange position for us to be in, after all these years of arguing that the banks ought to look for investments in these neighborhoods.”

Mr. Buckley said that the big loans could endanger affordable rental properties. But Stephen Siegel, a partner in SG2 Properties, which owns 1530 Sheridan, said the group’s business plan did not include driving out tenants. “We’re not looking to empty buildings,” Mr. Siegel said. “We’re looking to clean up buildings, improve security, get the graffiti off, make sure the doors lock. We’re not looking to turn them into condos. They work as rentals.”

The term “redlining” — excluding certain neighborhoods from private investment — grew out of the reforms of an era much like this one. In 1935, a federal agency was created to relieve failing banks by buying mortgages that were going into default. The same agency also helped struggling homeowners by offering them mortgages at lower rates than they were paying.

As part of its work, the agency developed a series of maps that rated neighborhoods by qualities that would make them suitable for mortgages. These maps were color-coded, and neighborhoods that were considered the least desirable were marked off with a red boundary line. The decision to cut off poorer neighborhoods from private capital was implicated as a factor in the slow collapse of inner cities during the 1950s and 1960s. Banks were accused of taking deposits from redlined areas, but not putting anything back.

In a drive against redlining, Congress passed the Community Reinvestment Act in 1977, which said that banks had to offer credit in every market they served. “In the 1970s, we used the C.R.A. to get the banks to start lending in the Bronx,” Mr. Buckley said. “By the 1980s, they had seen that it could be a profitable business, and were coming on their own.”

Today, in the post-mortems on the financial crisis, the Community Reinvestment Act is being blamed in some corners for forcing banks to make risky loans in poorer areas. Yet one study has found that nearly 75 percent of the subprime loans were made by mortgage companies, which, unlike commercial banks, are not subject to the reinvestment act. Mr. Buckley said that national housing organizers told officials at Fannie Mae that they did not want the agency to back loans that did not require down payments. And they tried to warn against piling too much debt on buildings that were just getting by.

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Subprime Meltdown: Expressed By Depressed Homes In The Bronx 

Williamsbridge — The glass is gone from the windows of 767 East 216th St. The wooden house sits on a sinking yard — its windows staring out with dead unblinking eyes. At 762 East 217th St., menus and newspapers clutter the tiny vestibule, the front door doesn’t lock and the buzzers don’t buzz, although people still live in the apartments. The house at 749 East 213th St. just looks disappointed; the proud brick three-story could have sheltered several families but it faces the intersection hollow, no glass in its storm door, no life in its windows. At 1041 East 216th St., newly built and utterly empty, a line of pink violation notices from the Department of Buildings hangs like some sad bunting welcoming the foreclosure age.

This is what the subprime meltdown looks like: block after block of brick one and two family homes in this working class neighborhood in the northeast Bronx are for sale, in foreclosure proceedings or simply abandoned, blank doors and windows gaping like open mouths. Fifteen lis pendens — notices of foreclosure — were filed for property in Williamsbridge since February 15. There were 86 during January; 54 in December.

There are six homes in foreclosure or headed there on one short block of East 217th Street, just off the commercial district of White Plains Road. Tenants at 720, a newly constructed brick building sold as co-ops, are in foreclosure. CitiBank’s mortgage unit alerted the owner of 732 just up the block that it began foreclosure proceedings the day before Valentines. 746 is in foreclosure. So is 747 across the street. And 760 is up for auction. And 762 next door. And Nancy Lewis at 815 on the corner of the next block is getting notices from Washington Mutual, who sold she and her handyman husband a $400,000 mortgage in 2006.

“A lot of people got scammed,” she said last week, after picking up her daughter from school. “People got riped off. Mhmm. And I’m one of them,” she said, shaking her head. The Lewises bought their house so their grown children and grandchildren could all gather in one place. “We wanted a place they could all come to, a backyard for the kids to play.”

Ms. Lewis was reluctant to discuss her finances in detail, but the $3,000 a month mortgage payments are unaffordable. She believed the mortgage broker’s version of new math when he sold she and her husband their home, not realizing until later that brokers earn a cut of every mortgage they sell, the bigger the mortgage, the bigger the cut.

She’s not alone. In 2006 Williamsbridge had one of the highest rates of homeownership in the Bronx, 31 percent, nearly matching the citywide average, according to data analyzed by NYU’s Furman Center for Real Estate and Public Policy. But while the neighborhood had the highest rate of mortgage lending in the borough bankers once shunned, a full 50 percent of those mortgages, and 51 percent of home equity loans, were subprime.

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