Today, the Obama administration announced two new programs to help a small segment of the U.S. housing industry get back on its feet, all with the promise that the taxpayer will not have to foot the bill.

HFAs Getting Help:
State and local housing finance agencies, also known as HFAs. They originate home loans for first-time homebuyers and lower-income buyers. They also provide refinance loans for rental properties. According to National Council of State Housing Agencies President Susan Dewey, the HFAs create between 100,000 and 200,000 new mortgages every year (this represents about 1 percent of the total mortgage market). They are also known for making very safe long-term loans with very low default rates. “Performance of HFA loans has materially outperformed most other loan types, especially when controlling for borrower profile,” according to a Treasury Department fact sheet. They create tax-exempt bonds based on their mortgage securities to pay for their operations.

Why HFAs Need Help:
Dewey says the HFAs have only issued $4 billion in bonds this year. In 2008 they issued $10 billion and in 2007 the total was $16 billion.

“With the market upheaval, we’ve been unable to sell new mortgage bonds for a year,” Bob Kucab, the executive director of the North Carolina Housing Finance Agency, said in a statement accompanying the release. “Despite all the ingenuity we can muster, we’re now helping only about a quarter as many first-time buyers as normal.”

The Obama/Treasury Plan:
1. The Treasury Department will buy HFA-backed securities issued by government controlled finance giants Freddie Mac and Fannie Mae.
2. Freddie and Fannie will provide the HFAs with a credit program to refinance the debt from their existing bonds at better rates and terms.

The hope is that these measures will provide the HFAs will the money needed to fund more new mortgages.

The Cost:
The HFAs will pay fees to participate in the new programs, which will supposedly cover the costs, but some reports have said that the initiative could cost taxpayers as much as $35 billion.

Treasury Assistant Secretary for Financial Institutions Michael Barr said there are some risks involved, but he didn’t expect taxpayers to take any losses for these programs.

“The expected cost to the government is zero,” Barr said of both programs. It seems unlikely, but perhaps…

Man! It is a good time to be a “first-time homebuyer!”  Not only are home prices at their lowest in years (at least in many parts of the country) and mortgage interest rates in a very affordable range,  but now, according to an article in the LA Times, the government has even announced that home buyers using the newly instituted tax credits can turn that break into cold, hard cash. That amount, up to $8,000, can be used for things like higher down payments, points paid to lower the loan interest rate, escrow fees or other various closing cost charges.

There are some strings attached. In order to take advantage of this cash offer:

• Borrowers must be “first-time homebuyers,” meaning they have not owned a home for the past three years. 
• Single borrowers must make no more than a gross income of $95,000 and married couples can make no more than $170,000 to qualify.
• Borrowers must buy their homes with FHA loans, in most cases this means providing a down payment of at least 3.5 percent of the home purchase price.
• Homebuyers must close their home sales before November 30 of this year.
• Buyers must stay in their homes for at least three years or they will have to repay the tax credit.

So if you are ready to get into a home, and have even a little bit of money saved up for a down payment, now is the time! Lock in your interest rate today, and start the paper work.  You have less than six months to make use of this free $8,000.