The second mortgage crisis has begun.
Same idea as the first crisis – bad bank loans, weak underwriting, and that risky practice of securitized mortgages – except this time it’s hitting large affordable apartment complexes in New York City.
From the Wall Street Journal on Aug. 15 (and also reported in Crain's): “The owners of the 1,230-unit, rent-controlled Riverton Apartments in Manhattan's Harlem neighborhood anticipate defaulting on the property's $225 million mortgage by next month, marking one of the housing bust's largest collapses of a New York City residential development.
Senator Obama made an astute comment last week to the nation’s mayors. He said that "change comes not from the top-down, but from the bottom-up.
The Bush corollary is that bad decisions at the federal level do go from the top on down, with local governments left to clean up the mess.
Two examples of what I mean:
• Military recruiters have developed special marketing techniques that target youth in low-income neighborhoods. Everything from parking decked-out Hummers in front of Bronx high school to recruiting users of internet role-playing war games. The efforts are not simply aggressive, but very often violate Dept. of Education guidelines. (Be sure to read this report from Borough President Stringer and NYCLU.)