New York's two largest issuers of affordable housing bonds plan to end the year with deals under the revised New Issue Bond Purchase program.

This week, the New York State Housing Finance Agency plans to offer the bonds to institutional investors Tuesday following a retail order period on Monday for $30.46 million of bonds. In connection with those bonds, the issuer will take $45.8 million of bonds out of escrow and sell them to the Treasury Department.

Next week, the New York City Housing Development Corp. plans to market $90 million of bonds to the public and will sell approximately $110 million to Treasury.

Serving on both transactions are JPMorgan as book-running senior manager and Hawkins Delafield & Wood LLP as bond counsel. Bonds offered to the public will have shorter maturities of up to 10 years, while those purchased by Treasury will have a single long-term maturity of 32 years with a sinking fund.

The HFA's deal will finance six affordable housing projects across the state and the HDC's will finance 11 in New York City. Six months ago it was not clear whether the issuers would be able to fully utilize their NIBP allocations.

Under the program created last year, Treasury agreed to purchase securities issued by Freddie Mac and Fannie Mae backed with bonds issued through HFAs by the end of 2009. The bond proceeds were put into escrow, and issuers were expected to sell long-term bonds to replace the short-term debt to finance single-family and multifamily housing projects by the end of 2010. The program allowed HFAs to lock in interest rates that were relatively low at the time.

In December 2009, HDC sold $500 million of multifamily bonds, the State of New York Mortgage Agency sold $389.1 million of bonds for single-family mortgages for first-time home buyers and the HFA sold $276.1 million for multifamily affordable housing.

Interest rates went even lower in 2010, making it hard for HFA to compete with commercial lenders on the rates they had locked in. Many HFAs said they had trouble meeting that deadline and in September Treasury extended the deadline by one year and issuers were allowed to relock interest rates to take advantage of lower rates.

One issue that had caused concern among letter-of-credit banks that provide credit enhancement during the construction period was a requirement that projects undergo another level of credit analysis before they could convert to permanent financing and mortgage insurance.

"The letter-of-credit banks were quite interested in understanding and making sure the provisions for conversion were clear and predictable," said Marian Zucker, president of finance and development at New York State Homes & Community Renewal, the entity that oversees HFA. "They wanted to know what the criteria were for their letter of credit to be released and that all got worked out."

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