Touting the success of the Treasury Department's New Issue Bond Purchase Program, a group of local housing finance agencies is urging the Obama administration to modify and extend the program, this time allowing the Treasury to exchange mortgage-backed securities it holds in its portfolio for MBS that wrap NIBP bonds.
“It's a program crying out for another round,” John Murphy, executive director of the National Association of Local Housing Finance Agencies, said in a brief interview Monday. If it is not extended, the NIBP program will expire on Dec. 31.
NALHFA issued a 21-page report detailing the NIBP's “tremendous story of success” for local housing finance agencies, as well as the proposal for an NIBP-2 it has floated to the Treasury Department earlier this year and a legal analysis concluding such MBS exchanges would be done under current law.
The Obama administration launched the NIBP program in October 2009 to boost housing state and local HFA issuance of affordable-housing bonds that support low- to moderate-income families at a time when the HFAs were still reeling from the financial crisis.
HFAs were unable to borrow at rates that would make their programs work. In addition, the HFAs that issued variable rate debt were hurt because the financial institutions they relied upon to remarket the debt and serve as buyers of last resort had either withdrawn from the market, been downgraded by credit rating agencies, or were trying to charge excessive fees and impose unfavorable terms on issuers.
The NIBP program provided a total of $15.3 billion temporary financing for state and local HFAs to issue new single and multi-family housing bonds to fund new mortgages for affordable homes.
The Treasury, under authority provided by the Housing and Economic Recovery Act of 2008, bought Fannie Mae and Freddie Mac securities backed by these new housing bonds.
Of the $15.3 billion, about $2.15 billion was allocated to local HFAs, according to NALHFA.
Forty-seven local HFAs — almost half of NALHFA's members — participated in the NIBP program. As of Sept. 30, 44 of the local HFAs reported they had created nearly 17,000 affordable housing opportunities for first-time homebuyers and very low-income renters.
