Press Releases
SC State Housing Officials Support Treasury Initiative - 11/5/2009
For many months, state Housing Finance Agencies (HFAs) across the country have been virtually frozen out of the Housing Bond market, struggling to find investors willing to buy their long-term, fixed-rate bonds at rates that allow HFAs to lend the proceeds affordably. Some HFAs had to suspend lending altogether, according to SC State Housing Executive Director Valarie M. Williams. “We were not going to let that happen in South Carolina,” she said. “Our staff has managed to keep our mortgage programs operating but at sharply reduced production levels and higher costs. “That’s why the Administration’s announcement earlier this month brought cheers in South Carolina and around the country.
As part of its comprehensive plan to stabilize the U.S. housing market, the Obama Administration announced a new initiative for Housing Finance Agencies that will help support low mortgage rates and expand resources for low and middle income borrowers to purchase or rent homes that are affordable over the long term.
“The federal government recognizes that the country’s economic recovery depends on the revival of its housing market” said T. Scott Smith, SC State Housing Chairman and president of WRS Real Estate Investments, a South Carolina corporation. “Although the housing market is showing some signs of recovery in some areas of our state and the country, it remains fragile overall.” Since last year’s crisis in the financial markets, the Housing Bond market has struggled to come back, with traditional investors – such as banks, mutual funds, and insurance companies – holding off or strictly limiting their purchases. As a result, HFAs have been unable to issue long-term fixed-rate Housing Bonds in any significant volume.
The HFA Initiative will:
• provide hundreds of thousands of affordable mortgages for working families;
• enable the development and rehabilitation of tens of thousands of affordable rental properties;
• be paid for by HFAs – not taxpayers;
• give an incentive to HFAs to transition back to market sources of capital as quickly as possible;
• maintain the viability of HFAs to preserve their important role in providing housing resources.
State HFAs have consistently engaged in prudent lending practices and SC State Housing is no exception. Unfortunately, events beyond their control, such as the collapse of the financial markets that led to the Housing Bond market freeze and liquidity crisis, have made it difficult or impossible for them to do what they have done so well over many decades—safe and sound affordable housing lending.
“This is not a bailout,” Williams stressed. “The Treasury Department is not giving money to state HFAs. It is investing in highly rated HFA Housing Bonds.” Mrs. Williams explained that HFAs are committed to paying back Treasury’s investment in full, with interest. Through a risk-based pricing structure, Treasury is protecting taxpayers against any potential losses, even though losses are unlikely, as no state HFA Housing Bond has ever defaulted.
Each HFA that would like to participate will be asked to develop a program participation request in consultation with Treasury and other government agencies indicating their desired level of participation in either the new bond or liquidity program. This bottom-up review will prudently shepherd program resources, so the program will not be sized any larger than needed to meet specific demand. Williams confirmed that SC State Housing staff has already submitted the Palmetto State’s program participation request.
“SC State Housing has a proven record of making good lending decisions, and now with the arrival of the Administration’s initiative, we can do so much more to support the housing recovery in our state,” she said.
Mortgage Revenue Bond (MRB) mortgages, the vehicle used by SC State Housing, are available only to families of modest means who purchase moderately priced homes. They are generally limited to first-time homebuyers who earn no more than the state’s median income. It’s important to note that the “first-time” provision is waived for single parents and in 34 counties of the state in severe economic distress.
The cost of an MRB financed home generally cannot exceed 90 percent of the average home purchase price in its area. In 2009, the average South Carolina MRB borrower income was $36,462 and the average MRB home purchase price was $104,028.
SC State Housing has never engaged in any form of subprime lending. The Authority has consistently offered largely fixed-rate 30-year mortgages and frequently requires pre-purchase homebuyer education to ensure that families are ready to take on the responsibility of homeownership. Private sector lenders who partner with SC State Housing staff make certain that the mortgages are carefully underwritten so that families can afford the monthly cost not only at the outset but also over the life of the loan.
SC State Housing combines private sector-like business acumen with mission-oriented public purpose, according to Williams. “We have built a multi-decade record of responsibility, effectiveness, transparency, accountability, and success in administering tens of millions of dollars in housing assistance for South Carolinians,” she said.
For more information on SC State Housing or it programs, call 803.896.0959, or visit the agency’s website: www.schousing.com. The South Carolina State Housing Finance and Development Authority is a self-supporting agency of State Government, operating at no cost to the taxpayers of South Carolina.
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