History

• In 1968, the Fair Housing act was enacted, allowing housing finance agencies to use bond proceeds to expand rental housing for low income households, according to the book "Mortgage Revenue Bonds; Housing Markets, Home Buyers and Public Policy." The book notes that Virginia's housing agency was the first to issue mortgage revenue bonds under the1974 act. The use of mortgage revenue bond programs by housing agencies continued to expand, especially during the 1980s, as the demand for them grew.
  
  

How the Programs Work

• Administering mortgage revenue bond programs is an option for all state housing agencies to help fund mortgages that have below-market interest rates. The programs can often be implemented in tandem with other community homebuyer programs. Two of these are Freddie Mac's Home Possible 97 and Fannie Mae's My Community Mortgage.
  
  Through the programs, the bonds, which are tax-exempt, are issued by state and local governments through housing finance agencies. Housing agencies do not issue the bond proceeds directly to the homebuyer. Instead, the loans are made through local lenders who participate in the agency's bond program.
  
  

Recent Changes

• In 2007, the U.S. housing market began to slump and in response, the federal government implemented changes to enhance mortgage revenue bond programs. Under a 2008 initiative called the New Issue Bond Program, temporary financing began being provided for housing finance agencies so that they could issue more revenue bonds. The program opened the way for several hundred thousand new mortgages to first-time homebuyers, as well as refinancing opportunities to put at-risk, but responsible and performing borrowers, into more sustainable mortgages, according to the U.S. Department of Housing and Urban Development website. HUD notes that the new bond issuance will also support development of hundreds of thousands of new rental housing units for working families.
  
  

Example of a Program

• In 2010, the New York State Housing Finance Agency sold $70 million in revenue bonds to build a 19-story condominium in Manhattan. At least 20 percent of the units must be made available to low-income families because the bonds were issued under the agency's mortgage revenue bond program.