May 4th, 2009 Raise Loan Ceiling On FHA-Insured Multifamily Mortgages
 Governor David Paterson |
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Governor David A. Paterson today sent a letter to the members of the New York State Congressional Delegation, urging them to bolster New York’s affordable housing efforts by supporting an increase in the multifamily mortgage loan limits used by the Federal Housing Administration (FHA) in high-cost areas. FHA-insured mortgages provide valuable access to credit in today’s tight credit market, thus encouraging rehabilitation and construction of affordable multifamily housing. Increased limits would enable new construction and/or rehabilitation of existing housing, which holds the potential to stabilize neighborhoods being devastated by foreclosures.
“This is a natural complement to our current economic recovery efforts,” said Governor Paterson. “A revision of FHA loan limits to remedy the effective lock out that unrealistically low limits in high-cost areas have created would provide an economic stimulus in the form of construction and community development, generating jobs and demand for materials and supplementing tax bases in our communities. And, because FHA operates from self-generated income, higher loan limits cost taxpayers nothing.”
Mortgage insurance provides a financial guaranty that insures lenders against loss in the event a borrower defaults on a mortgage. If the borrower defaults and the lender takes title to the property, the mortgage insurer reduces or eliminates the loss to the lender. Banks, who are particularly risk averse in this economy, won’t lend to projects if their mortgage insurance coverage is less than the investment
“I hope that my colleagues in Washington will partner to advance a prompt legislative solution to this problem,” Governor Paterson added. “Our nation’s high-cost metropolitan areas, where affordable housing is most in demand, should have equal access to FHA multifamily mortgage insurance, which has provided multifamily lenders and owners with the ability and the incentives to create tens of thousands of rental projects which otherwise may not have existed.”
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