WASHINGTON, DC-The Treasury Department has announced details of a temporary plan to provide more funding to state and local housing finance agencies that are struggling to stabilize housing markets and continue to provide support to local affordable housing initiatives.
The initiative, for which a total funding amount has not been revealed, consists of a bond purchase program to support new lending and a temporary credit and liquidity program for local housing agencies.
Specifically, Treasury will purchase securities issued by Fannie Mae and Freddie Mac that are backing the mortgage revenue bonds issued by the housing state finance agencies. The program will be able to support several hundred thousand new mortgages as well as provide refinancing for at risk current home owners, according to Treasury.
Affordable multifamily development is included in the program; in fact the new bond issuance is expected to support development of “tens of thousands” of new rental housing units, according to Treasury. The housing authorities can request that all or a portion of their allocation be used to issue single or multifamily bonds.
Two types of multi-family bonds will be allowed under the program: bonds that finance single-projects and bonds where proceeds can be used to finance multiple-projects that are approved or guaranteed by Fannie Mae, Freddie Mac, or the Federal Housing Administration.
“The rental component is what makes this initiative unique,” Melissa Quirk, policy analyst for the National Low Income Housing Coalition, tells GlobeSt.com. “It can be used for both first time homebuyers and for loans for multifamily development.”
The new program also includes additional Treasury backstop for these agencies, many of which are struggling with their own liquidity needs; it will purchase an interest in the GSE-provided replacement and liquidity facilities.
The measure may also provide an indirect boost to the near comatose debt markets as the housing agencies are required to sell debt to private investors equal to 40% of the amount borrowed under the program.