Government Set to Offer More Aid for Local Housing Market

Yesterday, in an attempt to provide much needed help to State and Local housing finance agencies, the White House revealed a new plan.

The Plan, which many feel is a follow-up to the White House's First Time Home-Buyer Tax Credit, essentially will help the agencies finance mortgages for first-time homebuyers and develop rental housing. This is logically seen as a part-B or follow-up plan, for the primary reason that, although the tax credit was a good incentive for first time home buyers to get out and shop, it still did not resolve the availability of funds for said buyers. While several first time home buyers sought to take advantage of the tax credit, local institutions were in such a credit crunch that it was extremely difficult to provide necessary funding to facilitate the transactions.

With the help of Fannie and Freddie, the aforementioned credit crunch will have some very powerful and much needed assistance. The plan provides that both Fannie and Freddie can and will bundle mortgages made by the various housing agencies and sell them as bonds to the Treasury Department. These bonds in turn raise more money and in the end provide for more capital or credit to be extended. Additionally, and what I find to be most important, Fannie and Freddie will now be willing and able to provide financing for the agencies with the support of the US Treasury. Prior to this plan, the Treasury was unwilling to back these agencies for what many reasoned was a fear of continued losses due to growing numbers of defaults.

While this will not play an enormous role in the over-all market, the agencies which directly assist in the first time home purchase of anywhere from 100,000 to 200,000 a year, will at a minimum create some much needed stimulus to the industry.

We should hopefully see the housing agencies throughout Massachusetts increase their lending in the very near future. The biggest factor is whether these agencies are ready to actually start lending or will they sit on these reserves and continue to play a conservative roll. Only time will tell.

Avi Liss, Esq.
Liss Law, LLC
www.lisslawboston.com
617 778 0363
aviliss@lisslawboston.com

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