A BROAD HOUSING BILL that includes far-reaching efforts to reform the nation's housing and financial markets was signed by President Barack Obama in May.

Not included in the final version of the bill were two amendments sponsored by U.S. Reps. Nydia Velazquez (D-N.Y.) and Bob Filner (D-Calif.) and supported by U.S. Sen. Charles Schumer (DN. Y.), which the National Multi Housing Council (NMHC) says could have an imperiling impact to both multifamily owners and operators as well as lenders.

Intended to protect affordable housing stock, the amendments direct the U.S. Treasury and the U.S. Department of Housing and Urban Development (HUD) to create a loan modification program allowing for government intervention in multifamily properties considered at risk of foreclosure. That intervention could include a restructuring of existing mortgages and transference of the property through short-sale of deed in lieu of foreclosure. While the amendments were successfully attached to the House version of the bill (H.R. 1728), Schumer withdrew the amendments from the Senate version due to point-of-order restrictions on modifications he sought just prior to the Senate vote.

“The thinking now is that Velazquez and Filner will probably try to get the amendments into a subsequent House bill, possibly attaching them to Section 8 voucher legislation,” says NMHC senior vice president of government affairs Jim Arbury. “It is still a definite threat.”

Schumer claimed that tens of thousands of New York City affordable apartment units were in immediate peril of foreclosure. And in a March 18 letter to Treasury Secretary Timothy Geithner, Velazquez and Schumer requested that the Obama administration create a Multifamily Preservation Program that would assist in “deleveraging” multifamily housing stock at risk of disinvestment and foreclosure. Specifically, the letter asks for HUD to conduct physical inspections of multifamily properties that don't meet fair market value (defined as an inability of net operating income to cover operation and maintenance of the property). A failed physical inspection under the proposal would result in a “regulatory default” and foreclosure of the property.

“The letter really shows their intent in this whole thing: to turn who-knows-what type of multifamily real estate basically into public or otherwise rent-controlled housing,” Arbury says, adding that the legislation would have a chilling effect on what is already a frozen credit market beyond GSE lending.