City announces $50M affordable housing initiative.

Mayor Rudolph W. Giuliani was joined recently by Fannie Mac Senior Vice President for Multi-family Housing Thomas W. White, Community Preservation Corporation President and CEO Michael Lappin, City Comptroller Alan G. Hevesi, and Housing Commissioner Deborah C. Wright in announcing a $50 million affordable housing initiative. This pilot program will serve the affordable housing needs of families in New York City. The announcement was made at a press conference held in the Blue Room at City Hall.

Mayor Giuliani said, "This program complements and extends the City's reach. It is another clear example of how the public and private sectors can work as partners, to strengthen the viability of our city's neighborhoods. This new Fannie Mae/CPC initiative is an important effort to protect and build upon the substantial investment the City already is making to preserve housing and keep it affordable in our neighborhoods through the use of pension funds, capital expenditures and tax policies."

Fannie Mac (Federal National Mortgage Association - FNM/NYSE), the nation's largest source of home mortgage funds, has committed to purchase from The Community Preservation Corporation (CPC) $50 million in multifamily mortgages in exchange for mortgage-backed securities (MBS). CPC, the largest originator of affordable multi family housing loans in the country, will underwrite, originate and service the mortgages financed tinder this program.

The program complements the extensive efforts of CPC and the City to redevelop and preserve low- and moderate-income communities. It provides crucially needed funds for the refinancing of existing high interest rate mortgages and for refinancing properties whose mortgages are maturing in an extremely tight credit market. The $50 million investment in FNMA securities plus approximately $6 to $7 million in second mortgage financing is expected to stabilize the economics in 2,000 to 3,000 affordable housing units.

The impact of the program is illustrated by the first two projects that have obtained new loans. The interest rate was lowered from 11 percent to 7.65 percent on a 43-unit garden apartment complex in Washington Heights/Inwood and the savings will be used to improve the complex's wiring. At a 61-unit complex in the Norwood section of the Bronx, the interest rate was lowered from 10.9 percent to 7.65 percent and the savings were applied to masonry improvements and a new roof.

CPC is originating first and second mortgages on recently renovated multifamily housing in the five boroughs of New York City, and the New York State counties of Westchester, Putnam, Dutchess, Ulster, Orange, Rockland, Nassau and Suffolk. The first mortgages, which will each range from $500,000 to $3 million, will be swapped for Fannie Mae's MBS. The second mortgages -- totalling approximately $6 to $7 million - will serve as credit enhancement t o Fannie Mac, and also will be securitized by CPC. CPC is marketing both the Fannie Mac and second mortgage securities.

Michael Hegarty, CPC chairperson and senior executive vice president of Chemical Bank, said, "This new $50 million initiative tackles the crucial problem of preserving affordable housing - which is so vital to preserving opportunity, resources and neighborhoods. It is an essential component in our affordable housing arsenal. CPC's 54 sponsoring members are pleased to participate in this further investment in New York."

Michael Lappin, president and CEO of CPC, said, "CPC views this program as the first step in creating a model that can be reproduced on a much larger scale to help address the country's multi-billion dollar affordable housing needs. The participation of 19 major financial institutions confirms that private capital can be prudently invested to support the long-term viability of our nation's neighborhoods. We also have the opportunity to build on this model and develop a financing program that not only can preserve, but substantially add to our affordable housing stock."

CPC members purchasing the securities include Amalgamated Bank, Apple Bank, Banco Popular de Puerto Rico, Bank of New York, Bankers Trust Company, Chase Manhattan Bank, Chemical Bank, Citibank, European American Bank, Home Savings of America, Independence Savings, J.P. Morgan & Co. Inc., Lincoln Savings, Long Island Savings, Metropolitan Life Insurance Company, New York Life, Roosevelt Savings, and Teachers Insurance and Annuity Association. In addition, Mitsui Trust Bank (USA) and the New York City Employees Retirement System (NYCERS) also are purchasing securities.