Obama Administration officials have unveiled a plan to aid state and local housing finance agencies that provide mortgages to first-time and lower-income homebuyers and enable the development or rehabilitation of rental properties. The measure will enable housing agencies in all 50 states to provide lending directly to families and enable the development or rehabilitation of rental units.
Under the initiative, the Treasury Department, along with Fannie Mae and Freddie Mac, will purchase housing bonds issued by the finance agencies. This will give the groups the funding needed to make new loans. The government will also provide a temporary credit program to allow the agencies to refinance their existing bonds to more favorable terms.
The finance agencies that stand to receive support from the initiative have had difficulty funding mortgages due to erratic bond markets. Susan Dewey, president of the National Council of State Housing Agencies, states that agencies are operating at only 20% to 25% of their usual capacity, with some groups forced to halt their lending entirely.
“This initiative is critical to helping working families maintain access to affordable rental housing and homeownership in tough economic times,” says Treasury Secretary Timothy Geithner.
The agencies will pay fees to participate in the program, which officials say will cover its cost. They are still working with the agencies to determine the extent of support needed. The initiative could cost as much as $35 billion. While the administration says the program comes at no cost to taxpayers, the Treasury Department is ultimately responsible if an agency defaults on its debt payments.