The announcement by Treasury Secretary Jacob Lew was timed to
coincide with the fifth anniversary of the Making Home Affordable
program, an Obama administration initiative launched at the height
of the economic crisis in 2009 to revitalize the housing sector and
curb runaway foreclosures.
He said the program would be extended through December 2016.
"We need to continue to be there for homeowners who are facing
foreclosure, those who are struggling with increasing interest rates
on their modified mortgages, and those whose homes are caught
underwater," Lew said at an event to mark the program's anniversary.
According to Treasury Department, more than 1.3 million homeowners
have modified their mortgages under the program, reducing monthly
payments by about $540 a month.
Although nationwide foreclosure rates have started dropping,
millions of families are still struggling. Different estimates of
underwater households range from 6.5 million to 9.7 million at the
end of 2013.
Lew also said the administration would use money from the Treasury
Department's Federal Financing Bank to help housing finance agencies
fund the construction of more affordable rental housing.
The collapse of the housing market created a spike in demand for
rental housing, which has driven up costs. Many Americans are
renting because they lost their homes, are afraid to buy a home, or
cannot access mortgage credit.
The Obama administration has called on Congress to allow Ginnie Mae,
a government-sponsored enterprise, to securitize loans made under
the Federal Housing Administration risk-sharing program, but so far
lawmakers have not acted.
The risk-sharing program allows state housing finance agencies to
underwrite multifamily FHA loans while agreeing to share the risk of
losses on those loans.
Lew said that until Congress acts, the administration was directing
the Federal Financing Bank to fund FHA-insured mortgages. Under the
new plan, the Federal Financing Bank could provide $500 million to
$1 billion in annual funding for rental housing projects.
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Allowing Ginnie Mae to securitize those loans would lower the
interest rates and bring down the cost of financing rental housing
Lew said the administration was also looking for ways to attract
more private capital to the housing market, which is dominated by
government-controlled mortgage finance firms Fannie Mae and Freddie
The Treasury Department is seeking public comments on what it can do
to foster a more robust private-sector mortgage securitization
market with the hope of making loans more available.
"I have directed my team to bring investors and securitizers
together in the months ahead so we can uncover new paths to increase
private investment," Lew said.
(Reporting by Elvina Nawaguna; Editing by Paul Simao, Toni Reinhold)
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