Multifamily loan limits and affordable housing mortgages increased. By Daniel Walker Guido
Home builders are expected to benefit from the recently approved 2002 VA and HUD financing, which creates hybrid loans that should enable an estimated backlog of 40,000 home buyers to qualify for mortgages. The new law also includes a 25 percent increase in FHA multifamily loan limits to spur development of affordable housing nationwide and increase financing for HUD Section 8 rental programs.
The increase in FHA insured loan limits is expected to help reverse a national decline in multifamily housing construction. Only 748 FHA-insured multifamily loans for new construction or substantial rehabilitation were made nationally over the past four years, producing 127,409 units, well under demand.
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In 15 of the nation's largest and most expensive cities in which to build, not one apartment development was constructed or substantially rehabilitated under the FHA program in 2000. In half of those cities, no units were built during the past four years. The multifamily lending increase was a top NAHB lobbying priority. "This should significantly help reduce the gap between the supply and demand of affordable apartments," explains Andrew Chaban, chairman of the NAHB multifamily committee.
Under the law's provisions, the FHA will also begin offering a new adjustable rate mortgage (ARM) hybrid that carries an initial fixed interest rate for terms between three and seven years. The rate is then adjusted for the term's balance. The idea is to provide greater flexibility for home buyers who need more up-front stability in their mortgage.