HUD, Treasury Team Up for Landmark Housing Partnership

The Federal Housing Administration (FHA) is partnering with the U.S. Department of Treasury Secretary to help struggling homeowners avoid foreclosure and increase access to alternative housing options, the White House announced in a news release.

The partnership, unveiled during the Making Home Affordable (MHA) Fifth Anniversary Summit, will increase access to affordable rental options and expand access to credit for borrowers. The collaboration will also support FHA’s multifamily mortgage risk-sharing program.

In addition, the Treasury Department announced a an extension of the MHA program for at least one year and a new effort to help jumpstart the Private Label Securities (PLS) market.

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“Families have been especially hard hit during the rental housing crisis. Demand is soaring and prices are climbing,” said Carol Galante, Federal Housing Administration Commissioner and Assistant Secretary for Housing, U.S. Department of Housing and Urban Development, in the news release. “To help the many hard working families who cannot find affordable rental housing, we are partnering with the Treasury Department, to broaden our efforts to create and preserve safe, decent and affordable rental housing by allowing more housing finance agencies access to the capital they need to build or maintain affordable multifamily apartment buildings.”

With the new HUD-Treasury partnership, the Federal Financing Bank (FFB) will use its authority to finance FHA-insured mortgages that support the construction and preservation of rental housing. The first partnership – also recently announced – with the New York City Housing Development Corporation will help restore affordable rental housing damaged by Superstorm Sandy in Far Rockaway, Queens.

The administration will extend the MHA at least until Dec. 31, 2016, to allow the administration to continue assisting homeowners facing foreclosure and those whose homes are underwater. To date, the MHA program has provided relief to homeowners across the country, including more than 1.3 million homeowners who have permanently modified their mortgages, saving a median of $540 a month in mortgage payments.

The Treasury efforts to catalyze the PLS market will help to expand access to credit for prospective homebuyers.

“Prior to the housing crisis, private label securities provided access to credit for many qualified Americans who did not meet Government Sponsored Enterprises (GSEs) and FHA eligibility requirements,” the White House says. “Securitization allowed the risks associated with extending mortgage credit to be allocated among investors with different appetites for taking credit and interest rate risk.”

While treasury officials have been working with regulators once the crisis to put regulations in place that address flaws in the securitization and lending practices that contributed to the financial crisis, few of the largest investors have returned to the market.

To entice investors, the Treasury recently published a Request for Comment in the Federal Register and plans to host a series of upcoming meetings with investors and securitizers to further explore ways to increase private lending. 

Written by Cassandra Dowell

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