October 2009 Update on CHFA’s Financial Situation
On October 19, the Obama Administration announced a state HFA (HFA) assistance initiative which will be available through the U.S. Treasury in conjunction with the Federal Housing Finance Agency, Fannie Mae and Freddie Mac. The plan injects a much needed boost to help CHFA and our fellow HFAs jumpstart our multifamily and single family lending programs under arrangements where the Treasury will purchase Fannie Mae and Freddie Mac securities backed by new mortgage revenue bonds, and provide replacement liquidity to support variable rate debt.
We at CHFA join our fellow state HFAs across the nation in applauding the Administration’s efforts to develop this program. We are excited to have access to the initiative to help us unleash the resources previously provided us under the Housing and Economic Recovery Act of 2008 (HERA). We also congratulate and extend our appreciation to the HFA trade organization, National Council of State Housing Agencies (NCSHA), for their relentless work with the Administration to foster the initiative’s development by strengthening the Administration’s knowledge of the practices and track record of HFAs.
CHFA staff is preparing our application to participate and designing new programs to utilize the funds.
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.
October 9, 2008
The financial market situation has affected the entire lending and credit market. The municipal bond market is currently frozen and few bonds are being issued. We at CHFA are continually monitoring the situation, but it remains unclear how long it will last. However, we feel it is important to respond proactively. The financial market woes have greatly increased our cost of capital, and in some cases effectively terminated our capital sources.
For single family, we’ve raised rates to offset what we project the current and future costs of capital will require. These rate increases will not affect any loans reserved prior to the increase, nor any of the HomeAccess and Habitat loans. This exception allows us to meet our commitments with the Habitat affiliates and the HomeAccess participants through the end of 2008. For all of our loan program lender participants and borrowers, we encourage everyone to focus on financial literacy and homebuyer education. Visit the homebuyer education section of our website for information on these free resources offered by CHFA.
The capital we currently use to fund many of our commercial loans is inaccessible at this time, which affects both our multifamily and business lending programs. We are absolutely committed to looking for new sources of sustainable, reliable capital to fund this line of business, which we recognize is a fundamental part of our mission. In the meantime, here is an overview of the status of our multifamily and business lending activity at this time:
For rental finance activity, rates for the tax-exempt programs have been raised for the same reasons listed above. For the taxable programs, which includes the SMART loan program and loans to finance the 9%, competitive LIHTC projects, production has been paused. This change will not affect those loans for which a commitment letter has been issued. It will, however, affect loans in our pipeline. We will work with the market to identify what alternatives may be available.
In business finance, as with rental finance, the market situation has caused us to pause some of our business finance lending activity. This will not impact our Rural Development Loan Program or our Renew Loan Program. However, all other business finance lending is being placed on hold. We will of course honor all commitment letters which have already been issued. Those loans in the pipeline for which no commitment letter has been issued will be tabled until we find new capital sources or until the situation in the financial market changes.
We have always been responsible and prudent in our lending operations and we will continue to be so.
We are available to answer any questions you might have.
CHFA's Participation in Hope for Homeowners and FDIC Streamlined Modification Program
As part of the 2008 Housing and Economic Recovery Act passed this summer, many borrowers now have the option of asking their lenders to consider restructuring the debt owed on their homes.
Fortunately, all CHFA borrowers receive fixed-rate fully amortizing mortgages preceded by our required free homebuyer education. Additionally, we service all of our loans in-house, and to ensure we do everything we can to help our borrowers be successful, we have an excellent loan servicing staff, well versed in options available to borrowers who may have had life changes making it difficult for them to make payments.
This safe and secure structure means we are not offering the Hope for Homeowners product to our borrowers. If you are having difficulties paying your mortgage, please talk to our loss mitigation team in Servicing.
In addition, the HopeNow Alliance has created a streamlined modification program which will go into effect December 15, 2008. The program offers a loan modification alternative to some homeowners. The program is not designed to work with FHA insured loans, again because the FHA loans are a safe and secure mortgage. Because most of the majority of loans held by CHFA are indeed insured by FHA, and therefore have clear modification guidelines already associated with them, CHFA is not able to offer the streamlined modification program.