HOUSING BONDS

The Mortgage Revenue Bond (MRB) and tax‐exempt multifamily housing bond programs
(collectively, Housing Bonds) have provided 4 million lower‐income Americans with affordable homeownership and another 1 million with rental housing opportunities. Each year, another 100,000 families buy their first homes with MRB mortgages. HFAs use multifamily tax‐exempt housing bonds to finance an additional 30,000 apartments each year.

Housing Bonds finance low‐interest mortgages for low‐ and moderate‐income home buyers and the acquisition, construction, and rehabilitation of multifamily housing for low‐income renters.Investors purchase Housing Bonds at low interest rates because the income from them is tax free. The interest savings made possible by the tax exemption is passed on to home buyers and renters in reduced housing costs.

Each state’s annual issuance of Housing Bonds and other so‐called private activity bonds,
including industrial development, redevelopment, and student loan bonds, is capped. In 2000, Congress increased the private activity bond cap by 50 percent and indexed it to inflation. The 2010 limit is $90 times the state population, with a state minimum of $273,775,000.

Congress restricts Mortgage Revenue Bond (MRB) mortgages to first‐time home buyers who
earn no more than the area median income (AMI). Larger families can earn up to 115 percent of AMI. The median income of an MRB borrower in 2008 was $39,195— just 78 percent of the national median of $50,303.
Congress limits the price of homes purchased with MRB mortgages to 90 percent of the average area purchase price. The average MRB purchase price in 2008 was $138,901— only 70 percent of the national median price of $198,100.

Multifamily housing bond developments must set aside at least 40 percent of their apartments
for families with incomes of 60 percent of AMI or less, or 20 percent for families with incomes of
50 percent of AMI or less.
In 2008, Congress provided $11 billion in new tax‐exempt Housing Bond authority to remain
available through 2010 and permitted HFAs to refinance subprime loans, defined as adjustable
rate mortgages originated after December 31, 2001 and before January 1, 2008, until 2010.
In October 2009, the Administration announced its HFA Initiative. The two‐point plan was
designed to help HFAs expand their affordable lending efforts and strengthen their financial
standing by overcoming obstacles to both created by the financial crisis. The plan created the
New Issuance Bond Program to fund home loans and finance rental production at affordable
rates; and created the Temporary Credit and Liquidity Program to help secure liquidity for
existing HFA Variable Rate Debt (VRD) to strengthen HFA lending capacity.