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FANNIE MAE ANNOUNCES INNOVATIVE WAY TO LOWER MORTGAGE COSTS FOR HOME BUYERS; FIRST EFFORT WITH WASHINGTON STATE HOUSING FINANCING COMMISSION

 SEATTLE, June 23 /PRNewswire/ -- The Federal National Mortgage Association (Fannie Mae) (NYSE: FNM) today announced that the Washington State Housing Finance Commission (WSHFC) is the first in the country to use a new tool called MRB EXPRESS to lower mortgage financing costs for lower income, first-time home buyers, who are the beneficiaries of the WSHFC's tax-exempt bond program.
 Fannie Mae's new MRB Express gives housing finance agencies more flexibility to adapt to changes in interest rates and allows them to save money by reversing the process by which they issue mortgage bonds. MRB Express is being made available now to a select group of housing finance agencies (HFAs) such as the WSHFC who still have unused authority to issue mortgage revenue bonds (MRBs). The MRB program sunset June 30, 1992. However, Congress is currently considering legislation that would permanently extend the authority to issue MRBs. This legislation has passed the House of Representatives and is currently pending consideration on the Senate floor.
 Fannie Mae Vice Chairman Frank Raines said: "The Washington State Housing Finance Commission has long been a leader in developing innovative housing finance programs. We are delighted to have had the opportunity to work with them and know they will serve as an excellent model for other housing finance agencies."
 Traditionally, mortgage revenue bonds are issued in a single large block at a fixed-interest cost, and mortgages reflecting that cost are subsequently originated. The new MRB EXPRESS process allows mortgages to be originated before the bonds are issued and in smaller increments that reflect current tax-exempt interest rates. A key feature of MRB EXPRESS is eliminating the costly process of selling long-term bonds, then investing the proceeds of the bond sale in short-term investments until mortgages are originated. Reversing this process will save hundreds of thousands of dollars in interest costs for the participating housing finance agencies, and ultimately, lower income, first-time home buyers.
 Kim Herman, the executive director of the WSHFC, said, "Fannie Mae's partnership with the WSHFC will save significant bond issuance expenses for the Commission, which will benefit our customers -- the low- and moderate-income home buyers throughout the state of Washington."
 Herman said that through this initiative, the Commission's participating lenders now have up to $15 million in mortgage money available at 6.65 percent until Dec. 1, 1993, through Fannie Mae's initial commitment using the new MRB Express.
 Home buyers will have the option of qualifying for mortgage loans using the flexible underwriting features of Fannie Mae's Community Home Buyer's Program. That program is designed for low- and moderate-income families who have good credit but who may not qualify for mortgages or could not afford the higher down payment requirements under traditional underwriting standards.
 Interested home buyers should call the WSHFC at 206-464-7139 for a complete description of the program plus a list of the mortgage lenders who are making this financing available.
 According to Jack Gallagher, Fannie Mae's vice president for public finance, MRB Express offers numerous financial and programmatic benefits to housing finance agencies.
 -- MRB Express reduces negative arbitrage costs. With MRB Express, housing finance agencies and Fannie Mae will negotiate a bond rate for forward delivery of MRBs, which eliminates the need to reinvest the proceeds of an MRB sale into lower yielding, shorter term investments. Fannie Mae can quote an agency a bond rate for delivery of a pre- determined amount of bonds anywhere from one month to six months in the future. With a contract for a forward sale, the housing finance agency can set a mortgage rate based on the bond rate immediately and instruct its participating lenders to begin originating mortgage loans without delay.
 -- Bonds can be issued under a set of master agreements to save time and legal expenses rather than going through the same process for each separate bond issue. These agreements provide the legal and programmatic framework for a subsequent series of bond sales that will take place subject to the terms of the master agreements. Once the master agreements are signed, an agency will be able to negotiate any number of series agreements, which will specify the amount of bonds to be issued, the bond rate, the issuance date, and other factors specific to the series.
 -- Bonds may be issued in smaller amounts and at frequent intervals. This is in contrast to the current practice of issuing one single MRB that is typically large in size. Smaller amounts of MRBs issued at more frequent intervals will help protect the agency against the risk that declines in conventional mortgage rates will not make their bond- financed mortgage money unattractive in the market. Further, with this structure, an agency can take out a new series commitment as soon as the proceeds of the current bond issue are obligated to home buyers.
 -- MRB Express transactions involve the direct private placement of bonds with Fannie Mae, which eliminates the sales commission charge that is typical with the sale of MRBs in the capital markets. These savings can be used by the housing finance agency to assist very low-income home buyers or for other program activities.
 Fannie Mae's Public Finance Office works with the nation's HFAs to reduce interest rates for mortgage bonds. From 1987 through 1992, Fannie Mae bought $3.8 billion in MRBs from nearly 50 HFAs through more than 75 private placements. In addition, from 1990 through 1992, 55 HFAs have enhanced the credit of their bond issues to triple A rating by using Fannie Mae's Mortgage-Backed Securities as collateral.
 Fannie Mae is a congressionally chartered, shareholder-owned company and the nation's largest source of home mortgage funds.
 -0- 6/23/93
 /NOTE: MRB EXPRESS is a service mark./
 /CONTACT: Charlotte Sterling of Fannie Mae, 202-752-7928/
 (FNM)


CO: Federal National Mortgage Association; Washington State Housing
 Finance Commission ST: Washington IN: FIN SU:


IH-MH -- DC016 -- 5093 06/23/93 15:01 EDT
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Date:Jun 23, 1993
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