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State-level subsidies

Did you know that states have housing finance agencies to promote affordable housing, too? And guess what? Fannie and Freddie help them. From Freddie Mac:

Mortgage Revenue Bonds

Bond Purchase Activity Supports Community Development

Mortgage Revenue Bonds (MRBs) are tax-exempt bonds that state and
local governments issue through housing finance agencies (HFAs) to help
fund below-market-interest-rate mortgages for first-time qualifying
homebuyers. Eligible borrowers are first-time homebuyers with low to
moderate incomes below 115 percent of median family income.

Benefits to Housing Finance Agencies (HFAs)

In purchasing MRBs, Freddie Mac works with HFAs in two ways:

  • As a credit enhancement: Originating
    lenders pool the mortgages into securities guaranteed by either Ginnie
    Mae or Freddie Mac and sell the securities, rather than the whole
    loans, to the issuing HFAs.
  • As investor: As part of its corporate investment program, Freddie Mac purchases MRBs issued by HFAs.

Does anyone know about the magnitude of these programs. One claim is that across the nation, they have helped a few million people get cheap mortgages. Anyone out there know if the bonds ever default? Or if they might soon? Any idea if the program has expanded or shrunk in the last decade?


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