A mortgage boon for New York real estate

Consider it an early Christmas present for New York real estate buyers (and those elsewhere, too).

A newly passed law raises the so-called ‘conforming loan limit’ for borrowers seeking Federal Housing Administration (FHA) insurance for their mortgages. That means that more condo, coop and home buyers will be able to quality for conventional mortgages, which traditionally have lower interest rates than the jumbo mortgages. Specifically, the new law increases the ceiling from for FHA-insurable loans from the current $625,500 to $729,950 and keeps it at that level through 2013.

The FHA, of course, does not originate loans itself. It provides the mortgage insurance that’s essential for anyone who doesn’t have an adequate down payment to quality for a prime loan. But in the current economy, the FHA is proving to be a real lifesaver, backing fully one-third of all mortgages used to finance homes purchased last year – a dramatic increase from the five per cent it guaranteed back in 2006.

What’s even better: the new provision targets such high-ticket areas as New York City, Los Angeles and San Francisco – also the most desirable places around. Although Manhattan remains healthier than the rest of the real estate world, this new provision could introduce even more zig into a marketplace that’s been threatening to zag. 

Kudos and complaints

Predictably, the National Association of Home Builders (NAHB) were quick to praise the change. As NAHB Chairman Bob Nielsen, a home builder from Reno, NV, said, “Restoring the higher FHA loan limits will help to stabilize home values, provide constancy while private investors re-enter the market, and enable millions of creditworthy consumers to get home loans with the best mortgage rates and lowest fees and down payment requirements,”

There are naysayers, too, particularly among those who oppose government spending. But, since the bill President Obama last week was far less dramatic than the original version, the complaints aren’t terribly loud. The previous proposal would have raised loan limits for the mortgage finance companies Fannie Mae and Freddie Mac, too.

So, for those of us with a genuine passion for real estate in the world’s greatest city, with the world’s most interesting housing stock (no prejudice here, again… just facts) it’s a welcome development – and just the right thing to goose the post Black Friday holiday spirit.