Bill Makes Important Loan Program Work for Brooklyn, New York, Not Just Brooklyn, Iowa
Washington, DC – September 15, 2009 – (RealEstateRama) — The House of Representatives today passed legislation that would dramatically increase the ability of the Federal Housing Administration to guarantee loan in big cities like New York. By a voice vote, the House approved HR 3527, sponsored by Rep. Anthony Weiner (D-Brooklyn and Queens), co-Chair of the Congressional Caucus on the Middle Class, and Rep. Gary Miller (R-CA), that is estimated to lead to 11,000 new high-rise rental units and $3 billion in loans to get many moribund developments underway.
The Federal Housing Administration (FHA) is an agency under the department of Housing and Urban Development that was created to guarantee loans to banks in instances when banks are unwilling to provide credit to home owners and developers. The agency has taken on increased responsibility due to widespread tightening of the credit market.
As a result of the lack of credit, even the most well planned and capitalized loan has been stuck in the quicksand of the liquidity crisis. The bill passed by the House would add muscle to federal efforts to create rental housing in New York and other big cities.
Two important provisions of HR 3527 are:
- New Higher limits for FHA eligibility: Up to now the FHA will only guarantee loans for developments in high-cost areas for less than $184,000 per unit. That limit effectively closed off developments in cities like New York. Weiner’s legislation would raise the limit to $377,000 per unit in extremely high- cost areas.
- Accommodation for elevator buildings: Rare is the high-rise building in Brooklyn, Iowa but nearly all of the housing in Brooklyn, New York requires elevators. The bill would raise the difference in loan limits for garden style apartment and high-rise elevator style buildings from 10% to 50%, reflecting the true disparity in construction costs.
It is estimated that the legislation would free up credit for the construction of 11,000 apartment units nationwide, including 2,088 in NYC. In total, this would mean approximately 12,000 construction jobs across the nation.
Rep. Weiner said “Given the scarcity of financing available and the shortage of affordable rental units in New York City, this effort should light a fire under the ice cold housing market in big cities.
Alan Wiener, Managing Director of Real Estate Finance for Wells Fargo said “This is a huge step forward and provides much needed additional liquidity in areas where this program hasn’t worked for years. Now this program can be used to finance much needed housing in urban areas, particularly affordable housing in urban areas.”
FHA is a self-funded agency supported by insurance premiums paid for by loan recipients. FHA loans have a The FHA portfolio of loans was noteworthy during the housing crash for low levels of defaults. For example, last year, FHA’s program for apartment buildings had a seriously delinquent rate of .3%, while the overall single family seriously delinquent rate was 7.9%.
The legislation is endorsed by a variety of groups including the Mortgage Bankers Association, the Low Income Housing Coalition and the Real Estate Board of New York.
