In its continuing efforts to stabilize the U.S. housing market, the Obama Administration on Oct. 19 announced a new initiative for state and local housing finance agencies (HFAs) that will help support low mortgage rates and expand resources for low- and middle-income households to purchase or rent affordable homes.
The initiative has two parts: a new bond purchase program, through housing government-sponsored enterprises Fannie Mae and Freddie Mac, to fund home loans and finance rental production at affordable rates; and a temporary credit and liquidity program to improve the access of HFAs to liquidity for outstanding HFA bonds.
This program could reinvigorate state HFA mortgage loan programs that have been dormant for the past two years, according to economists at NAHB.
As a result of the financial crisis, state FHAs have been virtually frozen out of the housing bond market and have been struggling to find investors willing to buy their long-term, fixed-rate bonds at rates that allow them to finance state first-time home buyer mortgage programs.
Although most HFAs have managed to keep their mortgage programs operating, they have had to reduce their lending and charge higher costs.
Discussions on the need to resuscitate HFA funding have been underway with U.S. Treasury officials for some time. NAHB sent a letter supporting this assistance earlier this year and has been monitoring developments in coordination with the National Council of State Housing Agencies (NCSHA).
"This initiative is critical to helping working families maintain access to affordable rental housing and homeownership in tough economic times," said Treasury Secretary Tim Geithner.
"Through the years, many low- and moderate-income Americans have been well served by state and local HFAs, but the housing downturn has hit these organizations too," Geithner said. "Through this initiative, the Administration aims to help HFAs jumpstart new lending to borrowers who might not otherwise be served and to better support financing costs of their current programs — key components in stabilizing the housing market overall."
Under the new HFA initiative, the Treasury will be purchasing Fannie Mae and Freddie Mac securities backed by the new mortgage revenue bonds. The program can support several hundred thousand new mortgages to first-time home buyers this coming year, as well as refinancing opportunities to put at-risk but responsible and performing borrowers into more sustainable mortgages.
The new bond issuance will also support the development of tens of thousands of new rental housing units for working families.
The initiative is expected to cost taxpayers little or nothing because HFAs will pay a fee to access both the new bond and liquidity programs. Those fees will increase over time and the initiative is temporary, both of which are designed to give the HFAs an incentive to transition back to market sources of capital as quickly as possible.
------------------
To read the latest issue, please visit Nation's Building News
To subscribe, please visit Nation's Building News on the NAHB Website
| 
