Citing Cincinnati Properties, Brown Urges Feds to Address Blighted, Dangerous Housing Owned by Fannie Mae

WASHINGTON, D.C. – Following a hearing of the Senate Banking Committee on Wednesday, U.S. Sen. Sherrod Brown (D-OH) pressed Federal Housing Finance Agency (FHFA) Director Mel Watt over the management and sale three Cincinnati-area multifamily property guaranteed through Fannie Mae. The properties fell into disrepair and contributed to neighborhood blight – causing health and fire code violations. One property – located in the Price Hill neighborhood – has been cited by city and state officials for neglect and fell into such a state of disrepair that it was sold well below market value, undermining the ability of local buyers interested in rebuilding the community. Brown sent a letter to FHFA urging the agency to take immediate action to prevent future neglect and blight. 

“In light of the questions raised by the oversight and sale of this property and maintenance issues at two additional multifamily properties in the Price Hill area, I urge FHFA to immediately review Fannie Mae’s guidelines for monitoring the condition of its properties and establish procedures to investigate and resolve city and state complaints,” Brown said in the letter. “In addition, Fannie Mae should review its procedures for selling foreclosed properties to ensure that all sales are in the best interest of the tenants and community and minimize losses to taxpayers.”

Additionally, Brown raised concern that the 47 unit building at 3050 Mickey Avenue was sold at auction, severely limiting the opportunity for local buyers to invest in their community.  

Brown’s letter to FHFA Director Watt can be seen below.

November 19, 2014

The Honorable Melvin Watt                                       Mr. Timothy J. Mayopoulos   

Director                                                                President and CEO                            

Federal Housing Finance Agency                                 Fannie Mae

400 7^th Street, SW                                                  3900 Wisconsin Avenue, NW

Washington, DC 20024                                             Washington, DC 20016                                 

Dear Director Watt and Mr. Mayopoulos:

In the past year, three Cincinnati multifamily properties with notes held by Fannie Mae, have been allowed to deteriorate to the point that they are hazardous to tenants and sources of blight in their communities. Fannie Mae’s treatment of one property – 3050 Mickey Avenue in the Price Hill neighborhood – raises questions about Fannie Mae’s commitment to tenants, local communities, and taxpayers.  

In January 2014, the City of Cincinnati and the State of Ohio filed suit against the owners of the multifamily property at 3050 Mickey Avenue, and Fannie Mae, which held the note to the property. The city and state asserted that there had been a “long pattern of neglect” by the property owners which resulted in “health and fire code violations for almost every unit” of the 47 unit apartment building. Shortly after the landlords entered a formal court agreement, signed by Fannie Mae, to complete all repairs by the end of June 2014, Fannie Mae posted the note to the property for sale as a nonperforming loan on the real estate website Auction.com (see enclosure). The loan was subsequently sold through that site.

I am extremely concerned that Fannie Mae’s supervision and sale of the property at 3050 Mickey Avenue were both detrimental to the tenants and undermined the Federal Housing Finance Agency’s (FHFA) mandate to “preserve and conserve the assets and property” owned by Fannie Mae and Freddie Mac. Fannie Mae acted quickly to offload the nonperforming loan through an online auction nearly one year after the City of Cincinnati issued its first order requiring Fannie Mae to make critical repairs. When the loan was sold, the property was undoubtedly worth less than it would have been if appropriate inspections and maintenance had been performed. In addition, by selling the property in an online auction, Fannie Mae offered little opportunity for local buyers with a stake in the property’s success to invest in their community.

In light of the questions raised by the oversight and sale of this property and maintenance issues at two additional multifamily properties in the Price Hill area, I urge you to immediately review Fannie Mae’s guidelines for monitoring the condition of its properties and establish procedures to investigate and resolve city and state complaints. In addition, Fannie Mae should review its procedures for selling foreclosed properties to ensure that all sales are in the best interest of the tenants and community and minimize losses to taxpayers.

Fannie Mae continues to play a vital role in financing for safe, affordable multifamily housing, and I look forward to working with you to ensure that Fannie Mae has the processes in place to prevent blight and deterioration that harms tenants and diminishes the value of Fannie Mae’s assets. Thank you for your attention to this important matter.

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