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Meltdown slams U.S. housing finance agencies

Utah agency manages to avoid funding crisis

SHARE Meltdown slams U.S. housing finance agencies

COLUMBUS, Ohio — The financial meltdown has come down hard on the nation's housing finance agencies, which provide tens of thousands of mortgages to first-time poor and moderate-income home buyers.

In Utah, an executive with the Utah Housing Corp., the state's affordable housing finance arm, said it has managed to avoid the funding crisis.

"Some of our sister agencies have announced that they are suspending some of their programs, " said senior vice president Grant Whitaker. "Utah Housing Corporation has not done that and does not expect to do that."

Whitaker said the quasi-state agency has access to various sources of funding that would allow the organization to continue pursuing its mission of providing affordable financing to income qualified applicants.

But West Virginia has stopped going to market with bond sales, as has Illinois' housing development authority. Ohio canceled a long-planned $150 million bond sale after the credit markets froze. Wisconsin suspended its entire loan program.

California temporarily suspended two of its long-term loan programs and removed two other down payment assistance programs.

"The banks are getting all this money, and we don't have access to anything," said Ken Giebel, spokesman for the California Housing Finance Agency. "The people who were part of the problem, which we weren't, are getting support and being bailed out and we can't do our programs."

At issue is the ability of the housing agencies to borrow the money they need to process mortgages by selling bonds at affordable interest rates. As the financial crisis exploded, it was virtually impossible to sell bonds at all, especially those associated with mortgages. As the markets have opened up, some sales are possible but at higher interest rates, which mean higher costs to taxpayers.

New York's housing finance agency sold $110 million in bonds a week ago, for example, but at more than a full percentage point higher than earlier this year.

The squeeze on credit is also coming at a time when unemployment is rising and revenue from property, sales and other taxes is falling — in some cases sharply.

State HFAs helped finance 119,920 mortgages in 2006, according to the most recent data. That's a fraction of the 6-plus million homes sold a year but represents an important segment of the housing market: first-time homeowners who may not be wealthy but have money for down payments and good credit histories.

The agencies offer only traditional, fixed-interest, long-term mortgages and often require homebuyers to undergo counseling about homebuying before receiving a loan.

The agencies also play a role alleviating part of the foreclosure problem, since many people taking out loans used them to buy foreclosed properties.

"Now, many of those borrowers don't have capital to purchase those homes," said Rachel Basye, spokeswoman for the Colorado Housing Finance Authority, where one in three of the agency's loans this year went to homeowners purchasing foreclosures.

Getting the housing finance agencies back on their feet is crucial to restarting the housing market, said Pat Begg, director of secondary marketing at Huntington Bancshares, based in Columbus, Ohio.

"To get the housing market off the ground you've got to get the first-time buyer off the fence and back into the market," Begg said.

E-mail: jlee@desnews.com