It’s a buyer’s market, but soon it might only be a certain buyer’s market.
Interest rates dropped to a nearly three-year low on Thursday, continuing a months-long downward slide. So buyers and bankers must be happy — with the cost of borrowing down, more people are applying for mortgages, right? Well.
Banks were apparently caught off guard by how fast rates have dropped. Some of the country’s largest lenders reported that the value of servicing rights fell between 7 and 10 percent during the second quarter of 2019, according to the Wall Street Journal. The country’s largest holder of those rights, Wells Fargo, logged a 9 percent drop from the previous quarter to $12.1 billion. JPMorgan, the second-largest, reported a drop of 15 percent to $5.1 billion.
At the same time, there’s a dark cloud hanging over buyers. A provision that allows Fannie Mae and Freddie Mac to purchase mortgages with high debt-to-income is set to expire in 2021. The Consumer Financial Protection Bureau indicated this week that it intends to allow the measure — dubbed the Government Sponsored Enterprises (GSE) patch — to lapse and is moving toward a stricter replacement. This could mean Fannie and Freddie will no longer buy up loans that have a debt-to-income ratio higher than 43 percent, which would in turn likely mean lenders won’t provide financing to such buyers.
Bank OZK is being accused of fostering an “animal house” culture that culminated in sexual misconduct and age discrimination.
Anna Carrillo, a former senior vice president within the bank’s Dallas-based Real Estate Specialties Group, alleges that she was fired after complaining that a junior paralegal in the department was underperforming. According to Carrillo, that paralegal was engaged in an inappropriate sexual relationship with another executive in the group, Wes Hardin, David Jeans and Keith Larsen report.
The lawsuit also claims that Hardin, another executive named Brannon Hamblen, who is the current president of the group, and two other men in the unit engaged in inappropriate conduct with a female receptionist earlier in 2017. In one alleged incident, Hamblen sent an inappropriate image to the receptionist, according to the lawsuit.
“It is a bank where male executives ran amok pressuring younger females to have sex with their supervisors in total disregard for the #MeToo movement,” the suit claims.
The bank responded in a court filing that Carrillo’s termination was “based on legitimate, non-discriminatory, and non-retaliatory business reasons.” Though the bank said Carrillo’s termination was part of a “restructuring,” the 54-year-old’s duties were assigned to the junior paralegal who is in her 20s. Hardin and the paralegal were ultimately fired following an internal investigation into their conduct.
Bank OZK is one of the most active condo construction lenders in the country. In the wake of the #MeToo movement, other major real estate companies, including WeWork, Cushman & Wakefield and Newmark Knight Frank, have been hit with sexual harassment and gender discrimination lawsuits.
Residential: The priciest residential closing of the day was for a condo unit at 220 Central Park South in Midtown, at $22.2 million.
Commercial: The most expensive commercial closing of the day was for an industrial building at 37-80 Review Avenue in Long Island City, at $6.7 million.
The largest new building filing of the day was for 25,167-square-foot residential building at 132-51 41 Road in Flushing. Kuo Ching Hsu filed the permit application.
NEW TO THE MARKET
The priciest residential listing to hit the market was for a condo unit at 1 Morton Square in the West Village, at $4.5 million. Douglas Elliman’s Keith Copley and Gavin Shiminski have the listing. — Research by Ashley McHugh-Chiappone
A thing we’ve learned…
First born children aren’t people! That’s technically the official position of the city of Los Angeles (and my three younger siblings). Under LA’s rent stabilization law, a landlord can increase the rent by 10 percent for each additional tenant who wasn’t initially part of the lease, including children. A first child is a freebie, though in cases where the oldest children are twins, the family must pay 10 percent more on behalf of one of the children. Thank you to Georgia Kromrei, who unearthed this policy gem.
Top stories from our other markets:
Amazon’s officially on a spending spree. After a big week of movement in the world of real estate that included shopping for 1 million square feet of warehouse space in Brooklyn, scoping out the We Company’s historic Lord & Taylor building for office workers and launching a new partnership with Realogy, the e-Commerce giant’s second quarter earnings report confirmed that the company has cash to burn, stock price be damned.
Another apartment landlord is turning to the short-term rental market to help pad their bottom line. Hartz Mountain Industries is seeking the city’s permission to house short-term rentals in its 809-unit apartment building in River North. If approved, the landlord would enter into a deal with Kasa Living to provide 161 short-term rental units, about 20 percent of the building.
Restaurateur Fabio Conti seems to be getting serious about real estate. Conti sold his Italian restaurant in Hollywood, Fabiolus Cucina, then purchased a pair of retail shopping centers in Inland Empire. The move was made as part of a 1031 exchange, which allows investors to defer capital gains taxes by using funds from a sale to buy new property.
Beauty mogul Sydell Miller is under contract to sell her sprawling Palm Beach estate for a new record – beating the previous $110 million mark set earlier this summer, though the exact figure isn’t known. She paid nearly $43 million for a full floor at the Bristol in West Palm Beach earlier this year. — Compiled by Alexi Friedman