An interagency partnership between HUD and the Department of Treasury will expand opportunities for state and local housing finance agencies (HFAs) to finance affordable housing through a new risk sharing initiative. On June 26, Treasury Secretary Jacob Lew announced that the Treasury’s Federal Financing Bank (FFB) would use its authority to finance mortgages insured by HUD’s Federal Housing Administration (FHA) under its Multifamily Mortgage Risk-Sharing Program.
Under the new arrangement, FHA will insure the loans through its Risk-Sharing Program, and FFB will purchase certificates or securities evidencing undivided beneficial ownership interests in the mortgages. While the FHA Risk-Sharing program has been historically successful in keeping financing costs low for HFAs since its establishment in 1992, the economic downturn has required housing finance reform to maintain the availability of low-cost capital. The Obama Administration has called on Congress to authorize Ginnie Mae to securitize loans through the FHA Risk-Sharing program as one option. The Treasury and HUD released an FAQ on June 26 (available here), clarifying that the Administration is not abandoning the Ginnie Mae legislation in favor of the FFB partnership. Instead, the HUD-Treasury collaboration is an interim strategy to reduce HFA borrowing costs while legislation is pending.
The New York City Housing Development Corporation will originate and service the first loans under this new initiative. The first project will be an affordable housing rental property in Far Rockaway, Queens that suffered damage due to Hurricane Sandy.