The Obama administration has announced a new initiative for state and local housing finance agencies (HFAs) that will support lower mortgage rates and expand resources for low-income borrowers to rent or purchase affordable housing. The Department of the Treasury and HUD, together with the Federal Housing Finance Agency (FHFA), Fannie Mae, and Freddie Mac, have developed this initiative to maintain the viability of HFA lending programs and infrastructure. The new initiative — which supports home ownership and affordable rental development — has two main parts:
- The New Issue Bond Program (NIBP) will provide temporary financing for HFAs to issue new mortgage revenue bonds. Using authority under the Housing and Economic Recovery Act of 2008 (HERA), Treasury will purchase securities from Fannie Mae and Freddie Mac backed by these new mortgage revenue bonds. The new bond issuance will support development of hundreds of thousands of new rental housing units for working families.
- Through the Temporary Credit and Liquidity Program (TCLP), Fannie Mae and Freddie Mac will provide replacement credit and liquidity facilities available to HFAs that will help reduce the costs of maintaining existing financing for the HFAs. The agreements will help relieve financial strains experienced by HFAs. Treasury will backstop the GSE replacement credit and liquidity facilities for the HFAs by purchasing an interest in them using HERA authority.
The initiative is temporary and designed to help HFAs transition back to their usual activities after experiencing a number of challenges due to the financial downturn. The initiative will require HFAs to pay a fee for access to the programs to encourage them to return to private sector alternatives.
