New Worries for Manhattan Buyers Seeking Mortgages

Based on this article, It looks like in sept price will have to go down, otherwise, there will be not enough qualified buyers in the market.

There is no political will to intercede in jumbo loans being lowered to $625,000. That will also have an affect on Manhattan RE. It will strain the lower end, 1 bedroom market which should have a 'trickle up' effect.

> otherwise, there will be not enough qualified buyers in the market.

there will be after prices adjust downward (erasing the price inflation that the excess of taxpayer's risk taking produced). it's a win for future buyers if they lock in a lower price, sth to celebrate, not to be worried about imho.

> She had always planned to put 20 percent down, but as the deal drew closer, she was told by the New York lender that the only way she would get the seven-year adjustable-rate mortgage at 3.5 percent was to put 38 percent down, bringing the amount below the $729,750 ceiling for a federally guaranteed loan.

why on earth are taxpayers being put at risk to guarantee an adjustable mortgage at all? and for somebody earning $700k-$1 million? totally nuts! gov should be limited to guaranteeing 30-year fixed rate for those with limited incomes. otherwise it ends up inflating prices hurting future homebuyers that end up paying the burden of inflated prices. i don't see this improving for the taxpayer till it becomes clear that the $ is being wasted and other spending needs consider non-discretionary (entitlements) become at risk.

youre right notadmin...the uncertainty and potential impact to manhattan re is yet another reason to sit on the sidelines and wait to buy

There's usually more to this kind of story than the Times real estate section bothers to chase down. It's easy to blame the lender, especially if you only get the borrower's side of the story.

Anyway, as others have said, tighter credit is ultimately a good thing for buyers - except those who want to stretch themselves to the limit to compete with buyers who have more cash.

I wouldn't wait to buy.

By next year, the thirty year mortgage may very well be eliminated.

As far as prices go, inflation is creeping up fast. And that means higher prices.

streetsmart, not certain if you're being sarcastic here, but of course if long-term (30yrs) fixed mortgages become unavailable, buyers will be left with a choice between

shorter-term mortgages, meaning much higher monthly payments, meaning much lower sales prices;

or ARMs or long-term mortgages with short-duration specific terms, which inspires much less confidence than a true 30-year fixed, so far fewer people will buy, meaning much lower sales prices;

either way, plummeting prices.

And gods help an owner if 30-year fixed goes byebye AND interest rates rise.

Where did this "myth" that 30 year mortgages would no longer be available come from?

I was offered both a 15 and 25 year mortgage from a UK bank several years (pre-boom) ago for a property in UK. UK government had no involvement in mortgages back then. If there is demand, the market will provide

"You honestly don't think the difficulties experienced by someone like the buyer in this story are not an increasingly routine occurrence in the prime Manhattan residential mortgage market?"

If you have shaky credit and a "non-traditional" source of income, private lenders will view you as more risky than others. This is a good thing. I've been hearing that the mortgage market will constrain Manhattan for years now. Doesn't seem to be having the impact everyone hoped and securing jumbo mortgages getting easier compared to 18 months ago. Old news, questionable impact.

Also, the spread between a jumbo and confirming 30 year fixed is about a half a point right now, where it has traditionally been before credit tightening. Certainly not enough to move the market one way or the other should they lower the jumbo limit in Manhattan. Not to mention that you can find the same 7/1 ARM's rate up to $1.5 million with private lenders. Makes me question the woman's credit worthiness in the article even more.

I've just been through the mortgage application process, yeah it took a while, about 40 days, but I just received a commitment letter from the bank on a 30 year fixed rate jumbo loan with only 10% down. I'm not entirely sure its quite as hard to get a mortgage right now as some people are making out.

@alanhart if you can show any correlation between interest rates and nyc house prices i may be more inclined to take you seriously, to date I have not seen any. I have only ever seen 30 year fixed loans in the USA, go to London and tell them that having no 30 year fixed loans lowers prices.

These are closest things i could find for any kind of chart(s) relating interest rates and sales.

Don't ask me to explain them though, looks like something my 6 year old nephew drew.
http://www.millersamuel.com/charts/gallery-view.php?ViewNode=1149082304RtUmi&Record=24
http://www.millersamuel.com/charts/gallery-view.php?ViewNode=1148498296QASpH&Record=23

Inventory seems to have a clear correlation
http://www.millersamuel.com/charts/gallery-view.php?ViewNode=1158784729GdANC&Record=36

The part of the article I found most interesting was the reference to a new requirement from Fannie/Freddie that 10-20% (not sure of exact number) of annual condo budgets be set aside for capital improvements. Anyone know more about this requirement? Typically, such expenses are handled by boards by using the reserve fund and/or raising an assessment on an "as needed" basis. How does the game change now that this new requirement is in place? Will condo boards raise common charges now to comply, will they mis-classify some of their regular annual expenses as capital improvements or will they just run the risk of Fannie/Freddie's disapproval. Thoughts?

aptometrist: Great question.

aptometrist: Fannie's requirement is that there is a 10% line item in the budget allocated toward reserves (for future repairs). For new developments, although there has been heavy resistence from developers, they have been caving in. This is more problemactic for established condos where less than 90% of the units have been conveyed. However, as an alternative to the 10% line item, Fannie does allow less than 10% as long as there is a 3rd party reserve analysis done showing that the % the condo does collect in reserves is enough to carry future repairs. Based on the life of the roof, hvac, elevators, etc. they may not need reserves of 10% from year to year. Fannie will consider a reserve analysis to show 10% isnt required. They want to hear the plan and if it makes sense, they may consider offering a waiver. Whether the condo assoc. complies to the required changes is a different story. sunny.hong@bankofamerica.com

I don't know if anyone commented on this article when it was published, but it elucidates the reasons behind the possible elimination of the 30 year mortgage.
http://www.nytimes.com/2011/03/04/business/04housing.html?scp=1&sq=30%20year%20mortage&st=cse

Shong, great response! Very informative and helpful. My guess is that the alternative to the 10% line item will lead to a boom in the 3rd-party-reserve-analysis business :-)

Debugoz - 10% down - in manhattan? If so, please do tell - from whom did you source the loan? Would love to connect with them. Cheers -

Park Slope Brooklyn, so not Manhattan. Bank is First Internet Bank, though I also had good feed back from Citi, FIB just had better rates.