Hot Off The Press: Obama Administration Announces Plan for State and Local Governments Finance Agencies
This program was created to increase the finances of working families and allow them to have more access to affordable rental housing as well as home ownership. Washington says it will have great long term effect and have little to no cost to the taxpayer.
Furthermore this program stimulates low mortgage rates and helps low and middle income borrowers to purchase or rent affordable homes for the long haul. This initiative is divided into two separate parts, the bond purchase program and the program to facilitate liquidity. The bond purchase supports new lending. The temporary credit improves access of the Housing Finance Agency (HFA) to liquidity for HFA bonds.
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 their infrastructure. The two main aspects of this initiative are:
1. New Issue Bond Program. This program 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 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.
2. 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 serve to help relieve financial strains experienced by HFAs and enable them to continue their important work. Treasury will backstop the GSE replacement credit and liquidity facilities for the HFAs by purchasing an interest in them using HERA authority.
In regards to the tax payer having little effect here is what the white house press release said in their statement. "Pricing under the program will reflect both the cost of any financing required by Treasury as well as a fee designed to cover any risk posed by the HFA. While there is risk that losses could exceed estimates, the fee schedule Treasury has adopted is designed to cover net losses under most stressed conditions and thus would minimize risk to the taxpayer."
To see the full plan click here Homeowner Affordability and Stability Plan.
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