CHICAGO — A package of bills passed by the Michigan House Wednesday would pave the way for the state housing authority’s issuance of municipal debt to fund refinancing programs helping homeowners hurt by the collapse of the subprime mortgage market. The program would aid those who are carrying variable-rate loans or have missed fewer than three mortgage payments in the last year. Proposed by the Michigan State Housing Development Authority, the “Save the Dream” programs would refinance adjustable-rate loans into fixed-rate loans and offer low-interest mortgages to homeowners who have been late on no more than three mortgage payments in the last year. Currently, the authority provides assistance only for first-time homebuyers.Michigan has the fourth-highest foreclosure rate in the country, and 17.7% of the mortgage delinquencies in the state involved subprime adjustable-rate loans that have been moving upward, according to a legislative analysis of the bills. The legislation would also raise the housing authority’s outstanding debt cap to $4.2 billion, according to Jeffrey Sykes, acting finance director of the authority. The cap dropped to $3 billion in November, and the legislation would extend it to November 2011.Under the proposed legislation, the programs would be funded through a combination of revenue from future single-family mortgage revenue bonds as well as past tax-exempt bond proceeds that the authority sold prior to federal regulations banning the use of tax-exempt financing to refinance housing mortgages.If the federal ban is lifted — as suggested this week by Treasury Secretary Henry Paulson and President Bush — then the authority would fund the program with as much tax-exempt financing as possible, Sykes said. “I would imagine that we would do tax-exempt to the extent that is available under the bond cap,” Sykes said. “If the program is huge, then we’ll have to do some kind of blending.” The housing authority currently carries about $2.5 billion of outstanding debt, which includes roughly $500,000 million of debt it issued as a conduit. The issuer sold a total of $880 million of debt during 2007. The agency plans to sell two bond issues in the next two weeks totaling $550 million.Under the proposed program, homeowners would have to carry relatively good credit to qualify for assistance, Sykes said. “We have to be financially prudent,” he said. “We have to look after our investors.” One of the three House bills would also allow the authority to create a recapture tax fund, which would be used to reimburse individual borrowers for taxes they have paid. The bills are now headed to the Senate.
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