Fannie Mae Initiates Foreclosure on Bronx Multifamily Properties Amidst Broader Market Strain

Fannie Mae Moves to Foreclose on Bronx Multifamily Assets

Fannie Mae has initiated foreclosure proceedings against a $61.5 million commercial mortgage secured by two significant multifamily properties in the Bronx, Fordham Tower and Fulton Towers. The action stems from alleged defaults by the borrower, Fordham Fulton Realty Corp., and guarantor Rajmattie Persaud, on a loan executed in December 2018 with Greystone Servicing Corporation Inc., later assigned to Fannie Mae.

Details of the Default

The complaint, filed on September 23, 2025, in Manhattan federal court, asserts that required monthly payments were missed consistently from April 1, 2020, through May 31, 2022, a period spanning 26 months. During this time, Greystone Servicing Corporation, Inc., acting as loan servicer, entered into seven separate forbearance agreements with the borrower. These agreements temporarily halted Fannie Mae's exercise of rights in exchange for the borrower's acknowledgment of default and commitment to specific repayment terms and monthly remittance of net operating income.

Despite these measures, Fannie Mae contends that Fordham Fulton Realty Corp. failed to cure multiple events of default. Payments due from October 2024 onwards reportedly remain outstanding. Further defaults include the alleged failure to provide required financial reporting for Q3 and Year End 2024 and obstruction of property inspections mandated by the loan documents.

Compounding the mortgage default are substantial unpaid city charges and liens. As of the complaint filing, Fordham Tower and Fulton Towers allegedly owe $1,669,439.13 and $3,161,069, respectively, in waste and wastewater charges. Consolidated Edison Company of New York, Inc. has also secured a judgment of $2,942,654.21 against the borrower, docketed as a lien. Additionally, Approved Oil Co. has filed liens, and the borrower entered into payment plans with the New York City Water Board for $3,916,279.54 in principal for outstanding water and wastewater charges.

These financial woes are exacerbated by significant property maintenance issues. The Environmental Control Board has levied nearly $705,000 in fines for hundreds of violations at both properties. The Legal Aid Society filed a lawsuit in April 2024 on behalf of tenants at Fulton Towers, citing over 600 open violations and alleging that the landlord was "falsifying certifications in an attempt to hide the severe nature of the buildings' neglect." Tenants have reported heat and water outages, and sporadically out-of-service elevators, with conditions reportedly worsening since Fordham Fulton Realty took over in 2009. Prior judgments by the Housing Preservation and Development (HPD), including an $8,500 judgment in 2023 for lack of heat and hot water, further underscore the neglect.

Market Reaction and Broader Context

This foreclosure action by Fannie Mae occurs within a turbulent period for New York City's multifamily real estate market, particularly for rent-stabilized properties. The broader market sentiment is bearish, with high volatility anticipated for related investment vehicles, especially in urban centers.

The distress is largely attributed to the Housing Stability & Tenant Protection Act of 2019 (HSTPA), coupled with high inflation and escalating operating expenses that outpace permitted rent increases. These factors have severely impacted the profitability and value of rent-stabilized assets, with property values declining by an estimated 35-60% since 2017-2018. This financial strain frequently leads to deferred maintenance and deteriorating living conditions for tenants, as observed at the Bronx properties.

Multifamily loan delinquencies in NYC have surged, with some institutions reporting a staggering 990% increase in non-performing loans, predominantly from rent-regulated properties. The Mortgage Bankers Association (MBA) reported that Commercial Mortgage-Backed Securities (CMBS) delinquencies for multifamily properties in NYC rose from 7% at the end of 2023 to 14.4% in 2024. While Fannie Mae's overall delinquency rate for loans 60 or more days delinquent stood at 0.61% in Q2 2025, this specific foreclosure highlights the ongoing challenges faced by government-sponsored enterprises (GSEs) and other lenders with exposure to distressed multifamily assets.

This situation is not isolated. More than 5,100 rent-stabilized New York City apartments are being marketed for a potential bankruptcy auction, with Flagstar Bank holding over $564 million in debt on these buildings. Flagstar Bank itself has faced significant profitability challenges and embarked on a strategy of de-risking its portfolio, including selling off distressed assets and initiating pre-foreclosure actions against loans exceeding $600 million.

"The inflation data fueled investor optimism that the Fed may pause interest rate hikes, a move that would ease pressure on corporate borrowing costs."

Looking Ahead

The ongoing financial distress in New York City's multifamily sector, as exemplified by Fannie Mae's foreclosure action, signals increased scrutiny on commercial real estate loans and potential ripple effects across the Commercial Mortgage-Backed Securities (CMBS) Market. Long-term implications may include a wider downturn for properties with aging infrastructure and management issues, potentially exposing other lenders to similar risks. This environment could also lead to further government intervention or policy adjustments concerning affordable housing and property management.

The macroeconomic environment, characterized by elevated interest rates and limited prospects for significant rate cuts in 2025, continues to exacerbate the financial strain on both property owners and lenders. While presenting substantial risks, the current climate may also create opportunities for distressed investors to acquire assets at historically low valuations, albeit with inherent financial fragility and ongoing regulatory headwinds. Lenders are expected to continue adjusting underwriting criteria and reassessing risk models for these increasingly high-risk assets.