February 2009 Update on CHFA's Financial Situation

As you are well aware, the nation is going through a severe economic crisis. CHFA is not immune to the situation. The municipal bond market, in which CHFA participates for our lending capital, has changed dramatically. Our finance team has been working diligently over the last few months to ensure CHFA is in the best situation possible to withstand the turbulence. Even so, the collapse of the nation's financial markets has stalled our business and made it harder for thousands of Coloradans to achieve their dream of affordable housing and also put many businesses' growth plans on hold.

Across the nation, some state HFAs (Housing and Finance Authorities) have had to curtail their programs or stop lending altogether. At CHFA, we've been fortunate to be able to continue lending; but we've had to increase interest rates on new loans to take into account the higher costs of obtaining capital in today's market. We've also had to reduce the number of financing programs available across our business. As a result, fewer Coloradans are able to get an affordable mortgage through CHFA, fewer affordable rental housing units are being created, and billions of dollars worth of jobs and economic activity have disappeared.

CHFA continues to take this situation seriously and is working to address the problem on two fronts. We and our sister agencies across the nation are reaching out to Congress and the new Administration to ensure they are aware about our needs for capital. We've outlined several ways the federal government can put HFAs to work to address the economic crisis.

CHFA and other HFAs issue tax-exempt Housing Bonds to fund mortgages originated by lenders for housing. Before the markets imploded last September, Congress essentially acknowledged the vital role and track record of HFAs and doubled the amount of tax-exempt Housing Bonds HFAs could issue between 2009-2011 under the Housing and Economic Recovery Act of 2008 (HERA). Their goal was to give HFAs more resources, so that in turn we could ensure consumers had access to affordable, fixed-rate mortgages to safely stimulate the housing market. HERA also allowed HFAs to use these tax-exempt Housing Bonds for mortgage refinance to help responsible, creditworthy homeowners trapped in sub-prime loans refinance into our safe, fixed-rate products. However, the markets' collapse makes it impossible for HFAs to issue the bonds needed to accomplish those goals without additional help.

The federal government can restore the tax-exempt Housing Bond market by purchasing Housing Bonds directly and providing credit enhancement to support the Housing Bond purchases of others. Treasury and the Federal Reserve Bank have already created programs to support the mortgage markets by purchasing mortgage-backed securities and to support other consumer credit markets by lending money to banks and other financial institutions. HFA's, whose safe lending practices were an anomaly during recent years, and who in no way contributed to the current crisis, would like access to the same assistance.

Additionally, CHFA is working closely with representatives at the State level to pursue alternatives. Public and private sector partners throughout Colorado understand the economic engine created through CHFA programs, and discussions are progressing.

In the meantime, we are pursuing new programs for all of our lines of business, using the tools and financing mechanisms available to us today. We plan to roll these new financing options out as quickly as possible, some within the next few weeks with more to follow.

Please watch our website at www.chfainfo.com for details and feel free to contact us with any questions you may have.