Tuesday, November 17, 2009

Reservoir Ruckus: Round II

The fight between local developer Steve H. Bryan and Reservoir homeowners continued yesterday as they squared off at the office of the Pearl River Valley Water Supply District Board. The Clarion-Ledger reported:
"Originally billed as a condominium project in February, the Mandalay development now plans to rent apartments and eventually convert them into owned properties, developer Steve Bryan told committee members today" and that "Bryan announced in September that the units — which will range from 900 square feet to 1,400 square feet — will have monthly rents starting at $1,000. Bryan said the units will be among the most luxurious in the metropolitan area." Article

Mr. Bryan, who has lost several complexes and projects to foreclosure this year, even went so far as to say "Our proposal, as you all are aware we were starting with a lease purchase program from the beginning. That has never changed. It must meet Fannie Mae guidelines," said Steve Bryan." WLBT story with video

Really? Lets see what those guidelines are. According to Fannie Mae guidelines, the appraisal has to show what rents are for other apartment complexes in the area. A market value rent is determined based upon these complexes. The renter can only use the difference between his rent and the market value rent on a lease-purchase transaction. Thus if someone rented a unit at Mandalay for $1000 a month, and the market value rent for that apartment was $900 a month, he could only use $100 a month towards his down payment.

Fannie Mae states in its guidelines "A project is ineligible if Projects where a single entity (the same individual, investor group, partnership, or corporation) owns more than 10% of the total units in the project (p. 535)" and that "at least 90% of the total units in the project have been conveyed to the unit purchasers (p. 549)".

This is a deal-killer for projects such as Mandalay because before Fannie Mae will finance any lease-purchases in the project, Mr. Bryan will first have to sell 90% of his units. Does anyone think there will be several hundred renters that won't need a mortgage to buy a Mandolay condo?

However, Fannie Mae is not the only consideration as the anytime a borrower has to put down less than 20% on a home, he is required to obtain mortgage insurance. The Mortgage Insurance companies have their own guidelines for projects such as Mandalay.

RMIC (Old Republic, yes, that Old Republic of Evans fame) states in its underwriting manual:
"Resales of converted condominium units from apartments, warehouses, etc. are eligible for RMIC insurance only if all the units have previously been sold to individuals other than the developer, and the project has been turned over to the HOA. Additionally, the appraiser must demonstrate market acceptance by using comparables that are resales from the subject project." Page 29 of RMIC's underwriting guidelines.

MI (mortgage insurance) underwriting guidelines are usually more strict than Fannie Mae guidelines. RMIC states "Only the portion of the lease amount in excess of the Fair Market Rental can be used for down payment" and that "Borrowers must make an initial down payment of 5% from their own liquid assets before the rental credit can be applied as equity." (page 21).

MGIC, the largest mortgage insurance company, is just as tough on lease-purchase deals. MGIC states on page 66 of its underwriting guidelines "In a “lease with option to buy” situation, only the portion of the lease/rent payment in excess of market rent is acceptable as a borrower’s down payment."

Lease-purchase transactions are also treated as a refinance by most lenders and Fannie Mae. The maximum loan-to-value for a refinance is lower than it is for a purchase, thus Mr. Bryan's renters will still have to come up with 5% down if they want to purchase one of his units even if they can use part of their rent towards the down payment. MGIC underwriting guidelines.

Mr. Bryan's public statements about Mandalay meeting Fannie Mae guidelines simply don't square with the underwriting guidelines of Fannie Mae and the mortgage insurance companies. . In order to meet Fannie guidelines, Mr. Bryan will have to first convert the entire project to condos, then sell 90% of it to homebuyers who won't use a mortgage from Fannie Mae to purchase the home. If he can get past that hurdle, then his renters can only use a portion of their rent, if any, towards a down payment and that is after they have saved enough money to meet the 5% down payment requirement by the mortgage insurance companies. In other words, if Mandalay is built as an apartment complex, it is probably going to stay an apartment complex.

It should also be noted Bankplus issued a loan to Mandalay Development for $1.75 million on February 19, 2008. The note became due six months later but the bank has obviously extended the note even though no modification has been recorded at the courthouse. The Secretary of State's website reveals Mr. Bryan is listed as a registered agent for the company but no one is listed as owner or member. The deed of trust refers to him as a member of Mandalay Development LLC. The articles at the SOS probably have not been updated, which is not uncommon.

Mr. Bryan has already suffered several severe financial reverses this year as he lost several complexes in foreclosure proceedings in various states and was fined by HUD as well.
If the project suffers the fate of other Bryan developments this year, will the site become another Harborwalk: an asset to the Reservoir area torn down by developers who bit off more than they could chew?

Earlier post on Mandalay Development controversy

16 comments:

Anonymous said...

Sounds like Mr. Bryan is on the hook again and will probably default on the Bankplus loan. Don't people these days get something concrete approved before getting a loan?

Anonymous said...

I haven't seen the CL today but the story on their web site last night was pathetically short on the details you've provided over the last week.

Anonymous said...

I live in the area. This is too prime property for low rent apartments. This development will kill any further high end development from coming in.

It was a dang shame that water district allowed the beautiful pine thicket to be bulldoozed for the BankPlus building on the corner of Old Fannin and Spillway. Just what we needed another fake colonial bank building that is too big (why do banks think they need such a large building.

BTW, I am a renter in the area and I don't want any low rent building in the area!

Anonymous said...

11:41, I agree totally about that BankPlus building. It's just obnoxious, it's so large.

It spoils what used to be a really nice view. That's progress for ya! If you can, ruin or destroy everything that people loved about an area in the first place.

Anonymous said...

Agree that "lease-purchase" does not square with Bryan's statements. Most of the FNMA purchases/orginations of late have been without the benefit of PMI insurance, as the private mortgage insurance comanies are in such dire financial condition. So how does FNMA keep orginating/buying mortgages to keep the administration happy.....FHA loans, where you can avoid the downpayment of only 3% by using downpayment assistance programs. These were supposedly outlawed in the stimulus bill, but then again, what do you call the $8,000 homebuyer's tax credit? FHA's capital reserves are projected at 0.53%, far below the Congressional mandate of 2%. The next government bailout will be FHA, and the media will realize it soon enough.

With the exception of Bankplus, who appears to have the loan on the real estate parcel, who is going to lend on this project....even for a HUD insured loan?

It certainly seems like Bryan is desparate. Arranging municipal approval allows him to get closer to the one thing he needs....a construction loan and the liquidity he appears to desperately need.

Kingfish said...

Problem also is even if no money down, you still have to get past the condo rules, which is going to be very hard.

Unknown said...

No doubt KF, being in the mortgage business, I can attest condo loans are quickly becoming harder to originate.

Anonymous said...

If this Pearl River Water Supply District property was appropriated by eminent domain for a reservoir, why is it being developed as a mega city? Aren't many public lakes throughout the country limiting excessive development?

Anonymous said...

"Lease Purchase" to them still means only paying "rent." They have nothing to loose when they move out overnight, and void a contract. That is why they are lease-purchasing to begin with. They have horrible credit and will never be able to "purchase" said property anyway.

Anonymous said...

Instead of trying to get this problematic apartment project approved and financed, why doesn't he just try to sell the property? How much longer could that take than all of the other problems he's going to have to wade through? It is an exceptional location, surely it would be tempting to investors who could come in and do something right with it.

He's already chin deep in financial ruin. Even if he let the bank have it, how would he be losing that much more than he already has? This situation is shaping up to a not so happy ending for anybody, except maybe the lender.

The drawback to that parcel could be the traffic, entering and exiting. A good engineering team could work that out fine though.

Good luck to everyone involved, most especially to the tax paying property owners who chose to live in that area for the very reasons that are beginning to be gobbled up by development.

Anonymous said...

According to the landroll records, he is not the owner. I assume since he is the developer, someone has hired him to do something with this property, and then was supposed to sell it.

His name is not on the Mandalay company as an owner either.

Kingfish said...

Actually I have a copy of the deed. Actually its an Assignment of Lease and it is transferred from the Bennetts to Mandolay Development.

Now the SOS does not list an owner for MD, but the deed of trust does list Bryan Investments as a member of MD. Steve Bryan signed the deed of trust as a member of Bryan Investments.

Kingfish said...

What was funny about the hearing this week was Bryan's lawyer, Steve Smith, brought a court reporter and told everyone there they were talking down every word said and would know who said it.

can we say intimidation?

Curt Crowley said...

I'm sure everyone was scared to death at the mere presence of the court reporter.

Further evidence of the chronic assholia that afflicts 95% of the legal profession.

Kingfish said...

I found it quite amusing and I'm sure no one else really cared either.

Anonymous said...

Re: the court reported. Anyone see the new episode of "Leverage" last night, where the fake "lawyer" took notes of everyone speaking throughout every encounter, before revealing at the end that 1) she wasn't an attorney (after representing a client in probate court) and 2) was actually a con artist auditioning for this team of con artists? It's a great new show.



Recent Comments

Search Jackson Jambalaya

Subscribe to JJ's Youtube channel

Archives

Trollfest '09

Trollfest '07 was such a success that Jackson Jambalaya will once again host Trollfest '09. Catch this great event which will leave NE Jackson & Fondren in flames. Othor Cain and his band, The Black Power Structure headline the night while Sonjay Poontang returns for an encore performance. Former Frank Melton bodyguard Marcus Wright makes his premier appearance at Trollfest singing "I'm a Sweet Transvestite" from "The Rocky Horror Picture Show." Kamikaze will sing his new hit, “How I sold out to da Man.” Robbie Bell again performs: “Mamas, don't let your babies grow up to be Bells” and “Any friend of Ed Peters is a friend of mine”. After the show, Ms. Bell will autograph copies of her mug shot photos. In a salute to “Dancing with the Stars”, Ms. Bell and Hinds County District Attorney Robert Smith will dance the Wango Tango.

Wrestling returns, except this time it will be a Battle Royal with Othor Cain, Ben Allen, Kim Wade, Haley Fisackerly, Alan Lange, and “Big Cat” Donna Ladd all in the ring at the same time. The Battle Royal will be in a steel cage, no time limit, no referee, and the losers must leave town. Marshand Crisler will be the honorary referee (as it gives him a title without actually having to do anything).


Meet KIM Waaaaaade at the Entergy Tent. For five pesos, Kim will sell you a chance to win a deed to a crack house on Ridgeway Street stuffed in the Howard Industries pinata. Don't worry if the pinata is beaten to shreds, as Mr. Wade has Jose, Emmanuel, and Carlos, all illegal immigrants, available as replacements for the it. Upon leaving the Entergy tent, fig leaves will be available in case Entergy literally takes everything you have as part of its Trollfest ticket price adjustment charge.

Donna Ladd of The Jackson Free Press will give several classes on learning how to write. Smearing, writing without factchecking, and reporting only one side of a story will be covered. A donation to pay their taxes will be accepted and she will be signing copies of their former federal tax liens. Ms. Ladd will give a dramatic reading of her two award-winning essays (They received The Jackson Free Press "Best Of" awards.) "Why everything is always about me" and "Why I cover murders better than anyone else in Jackson".

In the spirit of helping those who are less fortunate, Trollfest '09 adopts a cause for which a portion of the proceeds and donations will be donated: Keeping Frank Melton in his home. The “Keep Frank Melton From Being Homeless” booth will sell chances for five dollars to pin the tail on the jackass. John Reeves has graciously volunteered to be the jackass for this honorable excursion into saving Frank's ass. What's an ass between two friends after all? If Mr. Reeves is unable to um, perform, Speaker Billy McCoy has also volunteered as when the word “jackass” was mentioned he immediately ran as fast as he could to sign up.


In order to help clean up the legal profession, Adam Kilgore of the Mississippi Bar will be giving away free, round-trip plane tickets to the North Pole where they keep their bar complaint forms (which are NOT available online). If you don't want to go to the North Pole, you can enjoy Brant Brantley's (of the Mississippi Commission on Judicial Performance) free guided tours of the quicksand field over by High Street where all complaints against judges disappear. If for some reason you are unable to control yourself, never fear; Judge Houston Patton will operate his jail where no lawyers are needed or allowed as you just sit there for minutes... hours.... months...years until he decides he is tired of you sitting in his jail. Do not think Judge Patton is a bad judge however as he plans to serve free Mad Dog 20/20 to all inmates.

Trollfest '09 is a pet-friendly event as well. Feel free to bring your dog with you and do not worry if your pet gets hungry, as employees of the Jackson Zoo will be on hand to provide some of their animals as food when it gets to be feeding time for your little loved one.

Relax at the Fox News Tent. Since there are only three blonde reporters in Jackson (being blonde is a requirement for working at Fox News), Megan and Kathryn from WAPT and Wendy from WLBT will be on loan to Fox. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both and a torn-up Obama yard sign will entitle you to free drinks served by Megan, Wendy, and Kathryn. Get your tickets now. Since this is an event for trolls, no ID is required. Just bring the hate. Bring the family, Trollfest '09 is for EVERYONE!!!

This is definitely a Beaver production.


Note: Security provided by INS.

Trollfest '07

Jackson Jambalaya is the home of Trollfest '07. Catch this great event which promises to leave NE Jackson & Fondren in flames. Sonjay Poontang and his band headline the night with a special steel cage, no time limit "loser must leave town" bout between Alan Lange and "Big Cat"Donna Ladd following afterwards. Kamikaze will perform his new song F*** Bush, he's still a _____. Did I mention there was no referee? Dr. Heddy Matthias and Lori Gregory will face off in the undercard dueling with dangling participles and other um, devices. Robbie Bell will perform Her two latest songs: My Best Friends are in the Media and Mama's, Don't Let Your Babies Grow up to be George Bell. Sid Salter of The Clarion-Ledger will host "Pin the Tail on the Trial Lawyer", sponsored by State Farm.

There will be a hugging booth where in exchange for your young son, Frank Melton will give you a loooong hug. Trollfest will have a dunking booth where Muhammed the terrorist will curse you to Allah as you try to hit a target that will drop him into a vat of pig grease. However, in the true spirit of Separate But Equal, Don Imus and someone from NE Jackson will also sit in the dunking booth for an equal amount of time. Tom Head will give a reading for two hours on why he can't figure out who the hell he is. Cliff Cargill will give lessons with his .80 caliber desert eagle, using Frank Melton photos as targets. Tackleberry will be on hand for an autograph session. KIM Waaaaaade will be passing out free titles and deeds to crackhouses formerly owned by The Wood Street Players.

If you get tired come relax at the Fox News Tent. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both will entitle you to free drinks.Get your tickets now. Since this is an event for trolls, no ID is required, just bring the hate. Bring the family, Trollfest '07 is for EVERYONE!!!

This is definitely a Beaver production.

Note: Security provided by INS
.