Below Market Rate, GSE-Style. Maybe the best way to attract low-income home buyers is to cut interest rates to a level they can't refuse. And both Fannie Mae and Freddie Mac have worked out deals with local governments and housing agencies that may prove attractive to low-mod borrowers who have been discouraged by the recent interest rate rise. Freddie Mac's deal, developed under the connecticut state treasurer's affordable residential mortgage plan, is available to buyers who meet credit requirements and earn enough to carry a monthly mortgage payment. Those buyers may qualify for a low-interest loan that, occasionally, may be up to three-eighths of a percentage point below market rate at the time of the application. As much as $50 million is available for the program, which is available through 21 local lenders. Freddie said it plans to sell the securities packaged from the program's mortgages to the Connecticut state pension fund for its portfolio. While Freddie's program is aimed at Connecticut residents, Fannie Mae has focused on Texas. Fannie has purchased nearly $58.5 million of short-term, tax-exempt convertible option bonds issued by the Texas Department of Housing and Community Affairs. The bonds will be converted to tax-exempt, long-term single-family mortgage revenue products under the forward delivery structure of Fannie Mae's MBS Express program. The program will benefit nearly 1,000 low-mod families throughout Texas and Fannie said more $15 million is available to eligible first-time home buyers.

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