California Loans News

The U.S. Treasury has established a government program applicable in all states that is believed to augment the housing market. Fannie and Freddie Mac were used to aid state-run mortgage programs. This initiative targets state housing agencies to be provided with credit and liquidity.

Treasury secretary Timothy Geithner said in a statement, “This initiative is critical to helping working families maintain access to affordable rental housing and homeownership in tough economic times. [The initiative is designed to] jumpstart new lending to borrowers who might not otherwise be served and to better support the financing costs of their current programs.

Through the program, the Treasury would buy mortgage bonds backed by state-issued home loans, and those that are subsidized by local finance agencies. Fannie Mae and Freddie Mac would guarantee timely payment on the bonds along with an established fee. These mortgage finance companies would also set up liquidity facilities as backstopped by the Treasury.

Deputy assistant Treasury secretary Seth Wheeler said, “The purchase program will run through the end of this year.” However, no exact details about the size, fees and length of the program were disclosed. Also, information of credit line availability, expiration dates and state agency costs are not yet released.

Treasury assistant secretary Michael Barr explained that the volume of bonds to be bought and the liquidity facilities size would be set according to the demand. “We really believed it was important to build estimates for the program from the ground up,” he added.

Acting director of the Federal Housing Finance Agency Ed DeMarco said, “The program has been structured with commercially reasonable terms for Fannie Mae and Freddie Mac.” Both mortgage financing companies are under government conservatorship. Since November, both companies have also either received or requested federal aid amounting to $95.6 billion. Moreover, the California Housing Finance Agency has also encountered difficulties with higher funding costs and restricted liquidity in effect over the past year.

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