WASHINGTON — Touting the success of the Treasury Department’s New Issue Bond Purchase Program, a group of local housing finance agencies is urging the Obama administration to modify and extend it, this time allowing the Treasury to exchange mortgage-backed securities it holds in its portfolio for MBS that wrap NIBP bonds.
“It’s a program crying out for another round,” John Murphy, executive director of the National Association of Local Housing Finance Agencies, said in a brief interview Monday. If it is not extended, the NIBP program will expire on Dec. 31.
NALHFA
The Obama administration launched the NIBP program in October 2009 to boost housing state and local HFA issuance of affordable-housing bonds that support low- to moderate-income families at a time when the HFAs were still reeling from the financial crisis. HFAs were unable to borrow at rates that would make their programs work. In addition, the HFAs that issued variable rate debt were hurt because the financial institutions they relied upon to remarket the debt and serve as buyers of last resort had withdrawn from the market, or had been downgraded by credit rating agencies, or were trying to charge excessive fees and impose unfavorable terms on issuers.
The NIBP program provided a total of $15.3 billion of temporary financing for state and local HFAs to issue new single and multi-family housing bonds to fund new mortgages for affordable homes. The Treasury, under authority provided by the Housing and Economic Recovery Act of 2008, bought Fannie Mae and Freddie Mac securities backed by these new housing bonds.
Of the $15.3 billion, about $2.15 billion was allocated to local HFAs, according to NALHFA.
Forty-seven local HFAs — almost half of NALHFA’s members — participated in the NIBP program. As of Sept. 30, 44 of the local HFAs reported they had created nearly 17,000 affordable housing opportunities for first-time homebuyers and very low-income renters. This includes 33 local HFAs that used $269.87 million out of a total of $1.02 billion allocated for single-family housing bonds to help 7,540 homebuyers purchase affordable homes. About 97% of the homebuyers were first-time homebuyers with average incomes of 78% of area median income.
In addition, many local HFAs were able to use their initial NIBP allocation to leverage an additional $265.50 million in funding to serve other qualified borrowers, NALHFA said.
During the same time frame, 11 local HFAs used $794.85 million of the $1.14 billion allocated for multifamily bonds to finance 71 new construction or preservation projects containing 9,427 units, 91% of which were affordable to households with incomes at or below 60% of median area income.
While not every local HFA was able to provide jobs estimates, those that did said the financing created at least 4,736 construction and-or other permanent jobs.
“NIBP has been a critical tool in expanding affordable homeownership and rental housing opportunities, stabilizing blocks and neighborhoods as well as generating significant economic activity in response to the nation’s housing crisis,” NALHFA said in its report. “Without it, much of this economic activity would not have occurred. Its tremendous success is a clarion call for an additional round of NIPBP, as NALHFA has proposed.”
NALHFA earlier this year submitted a proposal for another round of NIBP, with two changes. The group asked that HFAs be permitted to structure their bonds to include a premium to cover down payment assistance. It also asked that HFAs be permitted to shift allocations from single-family bonds to multi-family bonds. The Treasury began permitting this kind of shift in the existing program two weeks ago.
Officials at the National Council of State Housing Financing Agencies said they plan to soon issue the results of their members involvement in the program. They said they have heard the NIBP allowed state HFAs to finance more than 100,000 single-family loans and more than 24,000 multifamily units.
