The Obama administration has announced a new two-part initiative designed to aid state and local housing finance agencies (HFAs). One component of the plan is meant to support new lending by HFAs, while the other piece is a temporary credit and liquidity program that the administration hopes will improve the access of HFAs to liquidity for outstanding HFA bonds.
The newly announced New Issue Bond Program (NIBP) will provide temporary financing for HFAs to issue new mortgage revenue bonds. Using its authority under the Housing and Economic Recovery Act of 2008 (HERA), the Treasury Department will purchase securities of Fannie Mae and Freddie Mac backed by these new mortgage revenue bonds.
The program can support several hundred thousand new mortgages to first-time home buyers this coming year, the administration says, as well as refinancing opportunities to put at-risk but responsible and performing borrowers into more sustainable mortgages. The new bond issuance is also anticipated to support development of new rental housing units.
The second program, the Temporary Credit and Liquidity Program (TCLP), calls on Fannie Mae and Freddie Mac to provide replacement credit and liquidity facilities to HFAs. The agreements will serve to help relieve financial strains experienced by HFAs, the administration says. The Treasury will backstop the government-sponsored enterprise replacement credit and liquidity facilities for the HFAs by purchasing an interest in them using HERA authority.
‘Housing bond purchase and liquidity support means that we will be able to provide the much-needed and highly demanded first-time home buyer mortgage at a reasonable rate to our borrowers," says Marge Della Vecchia, executive director of the New Jersey Housing and Mortgage Finance Agency. "In addition, this liquidity support gives us the ability to provide rate locks for our multifamily development projects that, to date, have been difficult, if not impossible to provide."
To have access to both programs, HFAs will have to pay fees, which the administration says have been designed to cover expected costs to the Treasury Department and taxpayers. The fee for the TCLP is structured to increase over time, so as to encourage HFAs to quickly find private alternatives.
SOURCE: Treasury Department