Tuesday, October 20, 2009

Government unveils new mortgage help

The Obama administration on Monday unveiled a new program to support state and local housing finance agencies. The plan will help the agencies finance mortgages for first-time homebuyers and develop rental housing.

The agencies have had a hard time raising money because of the housing crisis and credit crunch. This year, the agencies have sold about $4 billion in tax-exempt bonds — one-fourth the amount in a typical year. That reduction is limiting the number of loans they can make.

The new program uses mortgage finance companies Fannie Mae and Freddie Mac to help fix the financing crunch. The two companies will package mortgages made by the housing agencies and sell them as bonds to the Treasury Department.

The agencies play a relatively small role in the mortgage market, aiding about 100,000 to 200,000 first-time borrowers a year.

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