White House Plan to Aid HFAs Could Total $30B

The Obama administration late Monday unveiled a long-awaited temporary bond purchase and liquidity program designed to help state and local housing finance agencies provide billions of dollars in low-cost mortgage money to consumers. Even though officials from the Treasury Department and other agencies — including the Federal Housing Finance Agency — refused to quantify the effort, it's believed to be in the range of $30 billion. The plan is aimed at boosting the struggling market for mortgage revenue bonds, which is currently operating at about 25% of capacity. Year-to-date, state and local housing finance agencies have issued just $4 billion in mortgage revenue bonds, the proceeds of which are used to provide low-cost residential loans and build or renovate rental housing. As part of the plan to increase liquidity, Treasury will purchase Fannie Mae and Freddie Mac securities, which will be backed by new MRBs. The GSEs also will provide partial credit enhancements, which will serve as a guarantee of sort on the bonds. Some HFAs have completely shut down their lending programs because of a lack of liquidity caused by the housing crisis. Officials stressed that the programs will be paid for by state and local HFAs, through fees, and not taxpayers. Asked who would be on the hook for losses, Treasury assistant secretary Michael Barr said, "The HFAs are in the first loss position," followed by the Treasury and then Fannie Mae or Freddie Mac.