New State Multifamily Lending Guidelines feature UNHP’s BIP Database
NYS Department of Financial Services recently issued Guidelines for Bank Lending to Multifamily Properties Under the Community Reinvestment Act that the Governor is also referring as Slumlord Prevention Guidelines for Multifamily lending. The Guidelines look to ensure banks are only getting credit for responsible multifamily loans:
‘DFS must consider the integrity and viability of bank loan portfolios and the impact bank practices have on the communities in which they conduct business; otherwise, it would be remiss in its obligations under the State’s Community Reinvestment Act (Banking Law § 28-b (“CRA”)).’
Within the guidelines is a proposal for modifying which loans are eligible for CRA credit, based partly on UNHP’s Building Indicator Project. Loans would not get credit if they did not have a community development purpose:
‘1. Significantly reduces or has the potential to reduce affordable housing as determined by:
a. The number of affordable units before and after the financing, or a series of refinancings; or
b. Financial projections underlying the project that include the conversion of affordable units to market rate rents;
2. Facilitates substandard living conditions as evidenced by a high numbers of housing code violations, emergency repair liens, water bill liens or indexes of such measures such as those contained in the New York City Department of Housing Preservation and Development’s(“HPD’s”) At-Risk Multifamily Building Data, University Neighborhood Housing Program’s Building Indicator Project Database,or other information provided by municipal or state housing agencies;
3. Is in technical default based on the repeated violations of covenants in the loan agreement, even though the borrower might not be in payment default; or
4. Has been underwritten in an unsound manner, based on the assessment of market rents, building expenses and overall debt loads.’
The Guidelines also provide recommendations concerning appraisal, due diligence, property management, community relations.
UNHP applauds these efforts of DFS and is continuing to meet with them and other regulators around Multifamily lending practices.