Monday, September 28, 2009

Obama Administration To Commit $35 Billion For Mortgage Lending By Local Housing Agencies

Under the authority of the 2008 Housing and Economic Recovery Act, the Treasury Department, Fannie Mae and Freddie Mac are polishing the details of a new Obama administration program to purchase up to $35 billion in municipal debt to be issued by local government Housing Finance Agencies, which provide lower interest mortgage loans to first time and low income home buyers, usually at rates 0.5% to 1.0% lower than commercial lenders in the private sector. The new program is expected to buy $20 million in newly issues municipal housing bonds, plus another $15 million in variable rate demand obligations issued by the HFAs.

HFAs have financed home purchases for about 2.6 million families. Rising interest rates in the municipal bond market have choked off new lending by many HFAs, and as a result, affordable mortgage loans for low income and first time home buyers have dried up, delaying recovery of the housing construction market. While some in Congress object to the reentry of Fannie Mae and Freddie Mac into this segment of the home purchase financing market, the Obama administration seems to have a laser focus on continuing to promote home ownership among the less fortunate as one way of attacking the nation's economic woes. If your business is involved in housing construction, you should be watching eagerly for this program to be launched.
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