A new program announced by the White House for state and local finance agencies is intended to keep mortgage rates low and expand mortgage lending. The program is part of the Obama administration’s plan to stabilize the housing market.
The program would expand lending for low and middle income borrowers through local Housing Finance Agencies (HFAs), making it more affordable for those who want to buy a home, refinance or rent. The initiative has two parts, a new bond purchase program to support lending and a temporary credit program to improve access to credit-strapped consumers.
The program was unveiled after federal officials worked with local agencies three months to iron out details before making it available to local agencies. Government officials say the plan will provide hundreds of thousands of mortgages for families and enable the development and rehabilitation of tens of thousands of affordable rental properties.
The plan will be implemented at little or no cost to taxpayers since it will be paid for by local agencies as a temporary program, according to government officials.
“This proposal allows HFAs to continue offering below-market rate financing to first-time homebuyers, and we are ready and well-positioned to immediately begin implementing these critical programs,” said Susan Dewey, president of the National Council of State Housing Agencies.
“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.
“Through this initiative, the administration aims to help HFAs jump start new lending to borrowers who might not otherwise be served and to better support the financing costs of their current programs – key components in stabilizing the housing market overall.”
Fannie Mae and Freddie Mac will implement the program, according to Federal Housing Finance Agency (FHFA) Acting Director Edward J. DeMarco. “The HFA program has been structured to be on commercially reasonable terms” for both government sponsored enterprises.
A New Issue Bond Program (NIBP) will provide temporary financing for HFAs to issue new mortgage bonds. The Treasury Department will purchase securities of Fannie Mae and Freddie Mac backed by new mortgage revenue bonds. The program is being developed to support several hundred thousand new mortgages to first-time homebuyers in 2010, and aid in refinancing homeowners at-risk of foreclosure. The new bonds will also support the development of rental housing units.
“The administration’s housing bond purchase plan will allow us to serve thousands of additional families in Florida by offering much lower interest rates on mortgage loans,” said Steve Auger of the Florida Housing Finance Corporation.
The program is designed to be temporary to help bridge the gap until local agencies are able to obtain funding to supply mortgages from regular capital markets once the credit crisis improves. Local agencies will pay a fee to participate in the program, which may be joined by HFAs by applying to the Treasury Department.