Even as Congress moves to curtail the Federal Housing Authority’s outsize role in mortgage finance, FHA loans are propping up New York City real estate.
In 2011, FHA loans jumped to one-fifth of all New York City home-purchase loans, from almost zero in 2006, according to a new study by New York University’s Furman Center.
The Bronx showed the most growth, with 46 percent of home-purchase loans backed by the FHA. Staten Island, at 31 percent, took second place, followed by Queens, at 26 percent, and Brooklyn, at 21 percent. Manhattan had a mere 2 percent.
“The FHA is designed to stabilize the market when the private sector pulls out,” said Ingrid Gould Ellen of NYU. “These homes [may] not have been sold because people couldn’t get conventional loans.”
Nationwide, FHA loans accounted for about 45 percent of home loans in 2011, the study showed.
“Everyone says, ‘Well, why not let the private sector in that market?’ We did have the private sector — it was called subprime lending,” says Guy Cecala, CEO of Inside Mortgage Finance.