From the Herald:

If you own or plan to buy a condominium, an ominous new phase of the mortgage credit squeeze could be looming on your horizon.

As a result of underwriting changes by giant investors Fannie Mae and Freddie Mac, plus severe new restrictions by private mortgage insurers, getting a loan on a condo unit – or even refinancing one you already own – could prove tougher than you imagined.

For example, starting May 1, AIG United Guaranty, a major private mortgage insurer, no longer will write coverage on condominiums in hundreds of ZIP codes across the country that it designates as having “declining” market conditions. The ban is irrespective of applicants’ credit scores, assets or equity stakes. Even in the healthiest real estate markets, United Guaranty will require buyers to put at least a 10 percent down payment into the deal, and will reject applications on units in condo projects where more than 30 percent of the owners are investors.

Buyers with 20 percent or larger down payments are not affected by the private mortgage insurance cutbacks …

And what ZIP codes are included?

All of Boston.

02108, 02109, 02110, 02111, 02112, 02113, 02114, 02115, 02116, 02117, 02118, 02119, 02120, 02121, 02122, 02123, 02124, 02125, 02126, 02127, 02128, 02129, 02130, 02131, 02132, 02133, 02134, 02135, 02136

Who is harmed by this? The first-time homebuyer, of course, who may have put 5% (or less) down at closing.

Whether or not such tightening in lending standards will lead to less buyers and therefore to lower housing prices, is an open question. My first guess would be no, not in Boston Proper.

Source: Condo loans could be tougher to get – By Kenneth R. Harney, The Washington Post, by way of The Boston Herald

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