The U.S. Department of Treasury, in partnership with Department of Housing and Urban Development (HUD), and the Federal Housing Finance Agency (FHFA) has announced the purchase $13.9 billion in housing bonds from 50 of its state Housing Finance Agency (HFA) members under the Obama Administration’s HFA Initiative. The initiative was unveiled October 19. In addition to a single-family component, the HFA Initiative will make affordable financing available to provide affordable multifamily loans that will help keep rents affordable for tens of thousands of renters. Participating state and local agencies have already begun providing affordable mortgages financed through the HFA Initiative.
Background on the HFA Initiative
On October 19, Treasury announced a new initiative for state and local HFAs to help support low mortgage rates and expand resources for low and middle income borrowers to purchase or rent homes that are affordable over the long term. Following up on the intent to support HFAs first outlined in February under the Homeowner Affordability and Stability Plan, the Administration’s Initiative has two parts: a New Issue Bond Program (NIBP) to support new lending by HFAs and a Temporary Credit and Liquidity Program (TCLP) to improve the access of HFAs to liquidity for outstanding HFA bonds.
The New Issue Bond Program (NIBP)
The New Issue Bond Program (NIBP) provided temporary financing for HFAs to issue new housing bonds. Treasury purchased securities of Fannie Mae and Freddie Mac backed by these new housing bonds. With these investments, the HFAs have issued an amount of new housing bonds equal to what they are authorized to issue with the allocations provided them by Congress but have been unable to issue given the current challenges in housing and related markets. The program may support up to several hundred thousand new mortgages to first time homebuyers this coming year, as well as refinancing opportunities to put at-risk, but responsible and performing, borrowers into more sustainable mortgages. The NIBP will also support development of tens of thousands of new rental housing units for working families.
The Temporary Credit and Liquidity Program (TCLP)
Fannie Mae and Freddie Mac are administering a Temporary Credit and Liquidity Program (TCLP) for HFAs to help relieve current financial strains and enable them to continue to serve their important role in providing housing resources to working families. Treasury has agreed to purchase a participation interest in the Temporary Credit and Liquidity Facilities (TCLFs) provided to HFAs under the program, providing a credit and liquidity backstop. The TCLP provides HFAs with temporary credit and liquidity facilities to help the HFAs maintain their financial health and preserve the viability of the HFA infrastructure so that HFAs can continue their Congressionally supported role in helping provide affordable mortgage credit to low and moderate income Americans, as well as continue their other important activities in communities.
Over 90 state and local HFAs representing 49 states participated in the NIBP for an aggregate total new issuance of $15.3 billion. Twelve HFAs participated in the TCLP for an aggregate total usage of $8.2 billion. The Initiative is expected to come at no cost to the taxpayers and to the Government Sponsored Enterprises. Read More…