Where Can You Get an FHA-Approved Loan in Downtown Manhattan?

There was a whole lotta buzz today about this WSJ editorial that warns of huge impending risks at Ginnie Mae, the organization that bundles and sells loans backed by the Federal Housing Administration. The editorial argues that the FHA, which claims that it "costs the taxpayer nothing" ha ha ha ha is on the hook for $560 billion worth of mortgages which have a default rate of 7% very, very high and a delinquency rate of 13% ditto. By this measure, the FHA is leveraged at 33 to 1, similar to the pre-collapse Bear Stearns and clearly staring into the abyss of yet another f*ing housing crisis. So what exactly is the FHA?

Well, the FHA does not itself originate mortgages, however it backs mortgages originated by a variety of "FHA-approved" lenders. FHA loans (which kind of became an anachronism during the do I really need an income to borrow $1 million credit boom) were originally intended to help increase American homeownership, at a time when just 4 out of 10 Americans actually owned their own homes (today that statistic is closer to 7 out of 10). Like many government anachronisms, the FHA is still around today and offers borrowers with less-than-perfect credit and only 3.5% down the opportunity to own their own home Countrywide worked on a similar model except there it was 0% down and no income verification.

For single-family homes, FHA evaluates only the lender and the borrower - as long as the buyer qualifies for an FHA-backed loan from an FHA-approved lender, the mortgage is good to go, regardless of the property. For condos, the situation is different. The FHA must actually approve the underlying condo building itself. You cannot get an FHA-approved loan in a building that is not itself FHA-approved. So...can you get in on this racket in downtown Manhattan?

Well, it turns out that unlike every other mortgage or regular broker scheme to get you into any darn unit whether you're qualified or not, the FHA-approval route mostly escaped the attention of downtown condos. In fact, in all of Lower Manhattan, there are just two FHA-approved buildings, one in the Financial District, and one in "Two Bridges" which we only sort of recognize as a legit neighborhood anyway. The Two Bridges condo is affordable housing and the FiDi condo is 330 Pearl Street, a tiny 10 unit building that we actually visited and saw an FSBO in several months ago, although it appears that the unit never sold. 330 Pearl currently has no units on the market according to StreetEasy.com.

Stay tuned though, lots of stories out there about developers just itching to get in to the FHA pipeline, although none so far in Lower Manhattan.