Leahy Praises Support Plan For State Housing Agencies
. . . Remedies That Leahy Had Sought Will Help Vermont Homebuyers Find Affordable Housing
WASHINGTON (Thursday, Oct. 22) – Senator Patrick Leahy (D-Vt.) hailed a new Obama Administration initiative sought by Leahy that will free up some of the frozen liquidity of housing finance agencies like Vermont’s Housing Finance Agency (VHFA).
State and local housing finance agencies (HFAs) like VHFA expand access to affordable housing by helping low and middle income borrowers to buy homes. They work with participating lenders to provide affordable long term fixed rate home loans. The credit and housing crisis froze access to tax exempt capital and liquidity markets for many of the HFAs, significantly limiting their ability to serve the citizens of their states and communities.
The new initiative for HFAs will help support low mortgage rates and expand resources for low and middle income borrowers to buy or rent homes that are affordable over the long term. In December and January, at the peak of the crisis, Leahy and Senator Herb Kohl (D-Wisc.) led efforts to urge the Administration to act to help HFAs that were forced to suspend or scale back their mortgage assistance programs.
The Administration’s initiative has two parts: a new bond purchase program to support new lending by HFAs, and a temporary credit and liquidity program to improve housing finance agencies’ access to liquidity for their outstanding HFA bonds. The Vermont Housing Finance Agency’s primary need has been replacement liquidity for their variable rate debt obligations. VHFA’s current liquidity providers of variable-rate bond offerings, Dexia and DEPFA, were downgraded by rating agencies last fall, leading to higher rates that VHFA has to pay that debt. As a result VHFA has had to modify some of the programs it offers.
Leahy said, “For more than 35 years VHFA has helped thousands of Vermonters buy homes. It fills a vital niche in Vermont’s housing marketplace as a catalyst for affordable housing. The Administration’s solution will help VHFA fulfill that vital role in Vermont’s communities.”
The Department of the Treasury and HUD, together with the FHFA, Fannie Mae, and Freddie Mac, have developed this initiative to maintain the viability of HFA lending programs and infrastructure. This plan will be funded through fees by the HFA’s and should be at no cost to the taxpayer. There are still many details to work out, but the plan’s key parts are:
- New Issue Bond Program (NIBP). The 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 buy 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 homebuyers this coming year, as well as refinancing opportunities to put at-risk but responsible and performing borrowers into more sustainable mortgages. The new bond issuance will also support development of tens of thousands of new rental housing units for working families.
- 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 their existing financing. The agreements will help relieve financial strains for HFAs, enabling them to continue their important work in their local housing markets. Treasury will backstop the GSE replacement credit and liquidity facilities for the HFAs by purchasing an interest in them using HERA authority.
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Press ContactDavid Carle: 202-224-3693
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