LETTERS

I went to the BPCA town hall meeting back in December and after an orientation, the floor was open to questions.  One person spoke asserting adamantly that he cannot get a mortgage.

He referred to “the exotic nature of home ownership in the community
( which is based on a landlease rather than a “fee simple” title to the property) is making it impossible to get mortgages here, or to refinance.”
He lives at 380 Rector Place. He went on to say in essence that this hurts people and that taxation without representation is an example of how government doesn’t work.

I urge the man to google Fannie Mae warrantability.  He can also check the past sales in Battery Park City on StreetEasy and see how robust they are.
Fannie Mae has certain requirements which must be met in order for a building to be warrantable. If a building is not warrantable then Fannie Mae cannot purchase loans. And while Fannie Mae loan limits are 625,500, unwarrantability effects jumbo loans also.

One of the criteria that makes a building warrantable, according to Fannie Mae, is that no single entity whether an investor, corporation, or sponsor is allowed to own more than ten percent of the units.  This is not the case in my building, 200 Rector Place. A number of buildings here in BPC are subject to the same situation. The sponsor here owns about thirty percent of the units. However in order to get around this ( in other words to get an exception and thereby making financing available) a building can apply to Fannie Mae to seek an exception. The correct terminology  is that the building applies for their PERS approval.(project eligibility review service). Once the PERS approval is issued loans can be made in the building. However a PERS approval is only good for a specified amount of time and then has to be renewed. The managing agent is responsible for this renewal process. There have been times when the application for renewal did not come through by the PERS expiration date and lending ceased in the building.

Presently Liberty Court has a PERS approval that expires in August, 2017.
As far as lenders feeling uneasy about financing in a land leased building with an expiration date of 2069, this is not the case. Lender’s  requirements in order to finance is that the land lease has to have 30 years left on the lease for a thirty year fixed loan, 15 years for a 15 year fixed loan. This is a Fannie Mae requirement and the only requirement Fannie Mae has for a land lease.  The lenders then sell the loan to Fannie Mae. There are no concerns.

To summarize, the land lease has nothing to do with difficulties in obtaining a mortgage. Banks are not nervous about an expiration date of 2069.
I am not certain where all this is leading to but for some reason a number of people keep harping on the land lease as being the culprit of our financing woes which is clearly not the case.  I urge these people to redress this matter.