CalHFA Halts Lending
HOME LOANS, INDUSTRY NEWS, SHASTA COUNTY, TIPS FOR BUYERS
March 19th, 2009
Starting last fall, investors stopped buying mortgage bonds, a vital source of capital for state agencies that funded loans with below market interest rates for first-time buyers . The California Housing Finance Agency (CalHFA) used bond sales to, in turn, offer mortgages with interest rates about 1% lower than similar loans in the market place. Many states have curtailed lending activity while California, along with Texas and Wisconsin, have suspended their programs altogether according to a recent article in The Wall Street Journal.
The problem has nothing to do with bad lending practices. Despite many of the borrowers being low to moderate income, they were required to have stable incomes and good credit to take advantage of a state agency loan program. The market meltdown scared investors away from buying the state bonds combined with “the disappearance of investors who can take advantage of tax-exempt securities” according to the journalist. “As investors fled, interest rates on municipal bonds surged to the point where state agencies could no longer offer attractive mortgage rates.”
President Obama has expressed an interest in assisting state housing finance agencies but no details have been divulged. Last year, state agencies requested Congress raise the $17 billion limit on how much they could lend by $11 billion after record years in 2007 and 2008. The change was approved but the bond market collapsed at about the same time. States that are continuing their programs now price their loans above 7%, effectively taking them out of the mortgage loan market. They should consider following California’s lead by suspending their programs until bond prices recede.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
