WASHINGTON (Reuters) - The Obama administration on Monday launched a new program to help state and local housing finance agencies provide hundreds of thousands of affordable mortgages and further stabilize the depressed U.S. housing market.
The program, described as temporary by the Treasury, the Department of Housing and Urban Development and the Federal Housing Finance Agency, will use government-sponsored mortgage finance giants Fannie Mae and Freddie Mac to provide temporary financing for housing finance agencies hurt by gridlock in the credit markets.
The move is the latest attempt by the Obama administration to prop up the faltering U.S. housing market, by restarting a source of financing for first-time and low-income homebuyers that has all but dried up.
"Through this initiative, the administration aims to help HFAs jumpstart new lending to borrowers who might not otherwise be served and to better support the financing costs of their current programs," U.S. Treasury Secretary Timothy Geithner said in a statement.
The agencies did not disclose a dollar amount for the program, under which the Treasury will purchase bonds backed by the state and local housing agencies and backstop temporary credit and liquidity facilities for the housing agencies.
The Treasury said it will purchase securities issued by Fannie and Freddie that are backed by new mortgage revenue bonds from the housing state and local housing agencies (HFAs). Treasury said the bond program can support "several hundred thousand" new mortgages for first-time homebuyers in the coming year, as well as refinancing "at risk" borrowers into more affordable loans.
The plan also aims to help jumpstart the private lending market for the state and local agencies. Before using proceeds of new mortgage bonds under the program, the state and local housing agencies must sell debt to private investors equal to 40 percent of the total amount borrowed via Fannie, Freddie and the Treasury.
In the other part of the program, Fannie and Freddie will provide replacement credit and liquidity facilities that will help reduce financing costs and ease strains on the HFAs. The Treasury said it will backstop the facilities by purchasing an interest in them.
The federal agencies said the program will not be paid for by U.S. taxpayers but will be financed through fees paid by the state and local housing agencies. It uses authorities granted to the Treasury under a housing rescue bill passed in July 2008 -- the same bill that enabled the Treasury to seize control of Fannie and Freddie in September 2008.
(Reporting by David Lawder; Editing by Theodore d'Afflisio)
