The slow-motion reckoning in New York’s rent-stabilized housing has produced its first foreclosures from the largest distressed pool of all. In early 2025, the venture that holds a stake in failed Signature Bank’s rent-stabilized loan book filed six foreclosure actions against eight apartment buildings, alleging roughly $76 million in defaults.

How the loans ended up here

Signature Bank collapsed in March 2023, one of the bank failures of that spring. The FDIC took over its assets, including about $5.8 billion in loans backed by New York rent-stabilized apartment buildings — roughly 35,000 rental units, the large majority rent-stabilized.

In December 2023, the FDIC sold a stake in that rent-stabilized book to Community Stabilization Partners, or CSP — a venture combining the nonprofit Community Preservation Corporation, the housing nonprofit Neighborhood Restore, and Related Fund Management. The FDIC retained majority ownership; CSP took a minority position and the job of servicing the loans, with a mandate framed around preserving affordability. The structure was sold to tenants as protection. As Mayor Eric Adams put it at the time, “New York tenants in 30,000 affordable homes can breathe a sigh of relief today.”

The first foreclosures

That relief has limits when borrowers stop paying. A CSP affiliate filed six foreclosure actions against eight buildings — seven in Manhattan and one in Brooklyn — owned by an affiliate of Madison Realty Capital. The filings alleged roughly $76 million in unpaid debt, with default notices served the prior October after the borrower stopped making payments between May 2023 and February 2024.

CSP cast the move as a last resort against borrowers who would not engage. The venture said it was “exercising our legal remedies including foreclosure against a subset of unresponsive and uncooperative borrowers,” after attempts to work out the loans failed.

The bigger squeeze

The Signature foreclosures are a symptom of a broader distress wave among rent-stabilized owners. The 2019 Housing Stability and Tenant Protection Act sharply curtailed the rent increases and renovation cost-recovery that stabilized landlords had counted on, while property taxes, insurance and operating costs kept rising. Buildings underwritten before 2019 on assumptions of steady rent growth can no longer generate enough income to service their mortgages.

As Kenny Burgos, chief executive of the New York Apartment Association, has framed the core problem: “You can’t change the net operating income on the buildings.” With income capped and costs climbing, owners with maturing debt face a wall.

Lenders have responded by retreating. New York Community Bancorp — rebranded Flagstar — was once among the largest lenders to rent-stabilized housing, extending close to $3.9 billion a year; its new lending to the sector collapsed to a fraction of that. Industry tallies show lending to rent-stabilized properties down dramatically from its pre-2019 peak. With financing scarce and more loans maturing, analysts expect the foreclosure trickle to grow — and the Signature book, the single largest concentration of rent-stabilized debt in distress, to remain at the center of it.

Verification

Frequently Asked Questions

What was the Signature Bank rent-stabilized portfolio?
When Signature Bank failed in March 2023, the FDIC was left holding billions in its loans. About $5.8 billion of that was debt backed by New York rent-stabilized apartment buildings — roughly 35,000 units, most of them stabilized. The FDIC sold a stake in that book in December 2023.
Who bought it?
Community Stabilization Partners (CSP), a venture of the nonprofit Community Preservation Corporation, Neighborhood Restore, and Related Fund Management. The FDIC kept majority ownership; CSP took a minority stake and the servicing role, with affordable-housing preservation as a stated goal.
What foreclosures were filed?
In early 2025, a CSP affiliate filed six foreclosure actions against eight buildings — seven in Manhattan, one in Brooklyn — owned by an affiliate of Madison Realty Capital, alleging about $76 million in defaults after the borrower stopped payments.
Why are rent-stabilized landlords in trouble?
The 2019 state rent law sharply limited how much owners can raise stabilized rents or recoup renovation costs, while taxes, insurance and operating expenses kept climbing. Buildings financed on pre-2019 assumptions about rent growth can no longer cover their debt, and lenders have pulled back sharply.