State HFAs resuming lending

Wisconsin’s state housing finance authority will begin writing loans on March 1 for the first time in 18 months thanks largely to a $23.5 billion Treasury Department program geared at helping state and local housing finance agencies finance more than 200,000 home purchases.

The Wisconsin Housing and Economic Development Authority (WHEDA) will raise $325 million selling long-term bonds through the Treasury’s temporary financing program, providing it with lower-cost cash to fund its investment in single-family mortgages.

WHEDA also says it will be the first housing finance agency (HFA) to offer Fannie Mae’s new Affordable Advantage mortgage, a low-cost, 30-year fixed-rate loan that provides 100 percent financing for first-time homebuyers with excellent credit.

The loans require as little as $1,000 cash out of pocket, WHEDA said, and the loan may be used in conjunction with the homebuyer tax credit. Private mortgage insurance is not required, although the loan comes with job loss protection coverage that covers up to six months of mortgage payments if the borrower is involuntarily unemployed.

Before the financial crisis, state and local HFAs financed more than 3 million home purchases through the issuance of tax-exempt bonds. Turmoil in bond markets has forced many HFAs to scale back or shut down their mortgage loan and downpayment assistance programs.

In October, the Obama administration announced a temporary financing program, through which the government is purchasing securities issued by Fannie Mae and Freddie Mac backed by new mortgage revenue bonds issued by HFAs (see story).

The Treasury Department said last month more than 90 state and local HFAs representing 49 states participated in the New Issue Bond Program, for an aggregate total new issuance of $15.3 billion.

Twelve HFAs got an additional $8.2 billion through a Temporary Credit and Liquidity Program, in which Fannie Mae and Freddie Mac are helping state and local HFAs refinance existing bonds to lower their financing costs.

Turmoil in bond markets and California’s budget crisis forced the state’s HFA to suspend its 30-year fixed-rate mortgage loan and downpayment assistance programs in December 2008 (see story).

California’s downpayment assistance program, which provides loans to assist with downpayment and closing costs, was restored in May, and CalHFA announced a new 30-year loan program in June that was limited in scope because it did not rely on bond financing.

CalHFA this month said it received $5.4 billion in financing assistance through the Treasury Department’s temporary financing program, which will allow it to re-start other programs in the first months of 2010.

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