Freddie Mac announced this week it will buy $40 million in bonds that will be used to finance low-cost mortgages to promote recovery efforts in Mississippi areas hit by Hurricane Katrina.
Mississippi Home Corp., a state-created corporation that provides financing for affordable housing, will sell the bonds to mortgage giant Freddie Mac, which will allow about 350 borrowers to receive loans with a 5.61 percent interest rate.
The announcement marks the first installment on Freddie Mac’s commitment to fund up to $1 billion in below-market rate mortgages for storm recovery in Mississippi and Louisiana.
Freddie Mac is buying the bonds at a price that will enable MHC to make available an additional $1.2 million to cover three points of down payment or closing cost assistance, which works out to an estimated $3,000 per borrower, according to the announcement by Freddie Mac and the home corporation.
Mississippi Gov. Haley Barbour said, “Mississippi is grateful to Freddie Mac and Mississippi Home Corp. for this welcome injection of affordable mortgage credit to help the victims of Hurricane Katrina rebuild their lives and livelihoods. I congratulate them and thank them for their hard work and commitment to finance the restoration of so many Mississippi homes and neighborhoods.”
The mortgages, which can be used to repair or purchase homes in federally designated storm disaster areas, are available on a first-come, first-serve basis. A list of participating lenders can be found at www.mshomecorp.com. And information about the discount loan program is also available by calling (601) 718-4636.
“Because we are buying these tax-exempt mortgage bonds for our investment portfolio, we can safely price them so their rate is a quarter point below market. This will enable more Mississippi borrowers to obtain significantly more affordable mortgages for rebuilding or replacing their homes,” said Patricia Cook, Freddie Mac’s executive vice president of investments and capital management.
Sen. Trent Lott, R-Miss., said, “Individuals and businesses alike must have the incentives they need to stay on the Gulf Coast and rebuild bigger and better. To that end, I have been privileged to work with my colleagues in the Congress to ensure passage of two significant tax bills, both of which will give Mississippians a helping hand as we rebuild our lives. A critical component of this is allowing greater access to mortgage revenue bonds, which will fund below-market interest rate mortgages for first time homebuyers, as well as for home repair costs of up to $150,000.”
In an effort to help more borrowers caught in the 2005 storms, Mississippi Home Corp. is waiving its usual first-time home buyer requirement and raising its cap on home repair loans from $15,000 to $150,000 under special provisions in the federal 2005 Katrina Emergency Tax Act. To be eligible for the new mortgages, borrowers can earn no more than 140 percent of their area median income.
“Energizing Mississippi’s housing market is more important than ever,” said Dianne Bolen, the corporation’s executive director.
The first borrower to qualify for a mortgage through the new initiative is Kimberly Breal of Gulfport, who will use the loan to purchase her first home, according to the announcement. “My Realtor was familiar with the … program and suggested I contact my lender, Mississippi Mortgage,” Breal said. “Their participation in the MRB program helped to make my dream of owning my own home a reality,” she said.
Freddie Mac has also provided Mississippi Home Corp. with $900,000 to buy 35 travel-trailer units for use as temporary housing for displaced families and $50,000 to provide credit counseling to storm victims.
In addition, Freddie Mac adopted emergency policies that effectively suspended mortgage collections from many single and multifamily borrowers affected by the storm through Dec. 1, 2005, assured forbearance for National Guard members involved in recovery operations, financed as much as $300 million in pre-storm loans closed on homes in federally designated disaster areas, and joined with the Freddie Mac Foundation to donate $10 million to hurricane relief organizations, according to the announcement.
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