Freddie Mac Funds Low-Cost Loans to Hurricane Victims

Freddie Mac, one of the nation’s largest mortgage investors, announced it will buy up to $1 billion in tax-exempt mortgage revenue bonds (MRBs) in the Gulf Coast. Consequently, state and local housing finance agencies can provide below-market rate mortgages and home repair loans for up to 10,000 families displaced by Hurricanes Katrina and Rita.

The company made the commitment immediately after the Katrina Emergency Tax Relief Act was signed into law on September 23. This law waives the first-time homebuyer requirement on MRB loans and raises the cap on home repair loans from $15,000 to $150,000 for Katrina victims. Richard F. Syron, Chairman and CEO of Freddie Mac, explained the move.

“We committed to buy these MRBs at below-market interest rates so as many as 10,000 low-income families affected by these disasters can rebuild their homes at the lowest interest rates available,” he said. “[This] announcement further demonstrates what Congress created Freddie Mac to do: to provide stability, liquidity, and affordability for housing markets – both in good times and in crises like this one.”

The loans must be used by qualified borrowers to buy or repair homes in the federally designated Katrina disaster areas. However, consumers can also use the loans to buy a home in a different part of the same state, as long as they had a mortgage on a principal residence in a storm disaster area as of August 28, 2005. These special requirements apply only to loans closed before January 1, 2008.

Freddie Mac Praised by Congress

The company was lauded by Congress for its efforts.

“The commitment from Freddie Mac will help bring people back to Louisiana by boosting capital investment in new housing,” said Senator Mary L. Landrieu (D-La). “Nearly half a million homes have been destroyed or damaged beyond repair along the Gulf Coast. It is going to take a lot of work to rebuild, but investments like this will help restore our neighborhoods, rebuild our communities and revitalize our economy.”

U.S. Sen. David Vitter chimed in with: “I’m pleased that Freddie Mac is committed to helping victims of Hurricanes Katrina and Rita by offering low-interest loans to as many as 10,000 families in the disaster areas. These low-interest loans will greatly help families finance home repairs or rebuild their homes right here in Louisiana.”

Louisiana Governor Kathleen Babineaux Blanco said she commends Freddie Mac and the Louisiana Housing Finance Agency for moving so quickly to turn the Katrina Emergency Tax Relief Act into real opportunities and financial relief for citizens in need. The initiative means “up to $1 billion in new affordable housing loans for thousands of Louisiana families that were devastated by Hurricanes Katrina and Rita.”

Freddie Mac said it’s buying all of the mortgage revenue bonds for its retained portfolio, which will enable the state and local finance agencies to begin issuing the bonds as quickly as possible. The bond proceeds will then be made available to qualified borrowers as below-market loans through participating lenders in each state.

This news is not Freddie Mac’s first foray into Gulf Coast assistance. Since Hurricane Katrina struck, the agency has adopted emergency policies that accomplish the following missives:

• Effectively suspend mortgage collections from many single and multifamily borrowers affected by the storm until at least December 1 a
• Assure forbearance for National Guard members involved in recovery operations
• Finance as much as $300 million in pre-storm loans closed on homes in federally-designated disaster areas
• Donate $10 million to hurricane relief organizations