WASHINGTON - The Georgia Housing and Finance Authority has completed the, first public offering of single-family mortgage revenue bonds that includes municipal forwards, official involved with the deal said last week.

The $54.9 million mortgage bond issue sold on Dec. 2 contains a new-money portion totaling $25 million, including $8.5 million sold for forward delivery.

Municipal forwards are essentially futures contracts in which investors agree to purchase tax-exempt bonds on a specific date at a particular interest rate. In exchange for the forward contract, the issuer pays a slight yield premium on the bonds when they are sold.

In Georgia's case, the structure,was used to help the authority avoid temporarily reinvesting a portion of the bond proceeds and generating negative arbitrage.

Housing authorities generally issue mortgage bonds to purchase loans from lenders with whom the authorities negotiate to offer low rates to first-time home buyers. Because there is usually a lag time between bond issuance and loan purchases, the bond proceeds are temporarily reinvested. With interest rates at historically low levels, authorities have found the investments have been generating negative arbitrage, particularly on proceeds from the long-term portion of an issue.

In Georgia's case, using municipal forwards allowed the authority to defer delivery on its long-term portion. The $8.5 million to be delivered on March 17 will mature in 2023.

Over the next three months, the authority expects to spend the $16.5 million of proceeds from the shorter-term bonds that were issued for current delivery. By March, the authority should be prepared to spend the proceeds from the long-term bonds and will not have to reinvest them, thus avoiding negative arbitrage, said Bo Daniels, a vice president with Goldman, Sachs & Co., the underwriter for the issue.

Delaying delivery of the long-term bonds "gives the issuer an opportunity to get their programs up [and running], to get things going, to originate mortgages," Daniels said. "By the time you deliver the forwards, the program is in place and you don't have the negative arbitrage."

A statement by Goldman said using the forwards structure permitted the authority to Provide home buyers with a 5.80% interest rate, its lowest ever.

"This represents the kind of technology that tax-exempt issuers are going to have to employ in the future to be competitive," said David Pinson, the executive director of the Georgia authority. "This is sort of the front end of a whole wave of creative thinking that's going on."

The structure used in the Georgia deal is one of several that issuers are trying in order to combat the effects of low interest rates on the investment of bond proceeds, said a bond lawyer who asked not to be identified.

Housing authorities "are caught in a marketing squeeze," the lawyer said. They are trying to find a way to avoid negative arbitrage and still offer the lowest rate possible to borrowers, he said.

Municipal forwards are widely used, but in the single-family housing market the issues all have been privately placed up to now in making a public offering, the Georgia authority was seeking "a wide variety of investor types to appeal to, which helps in the pricing of the bonds," Daniels said.

Predictions that tax-exempts will be in short supply next year are making investors "seem very keen on this sort of product," said Adam Sherman, another Goldman vice president. "They're not sure about getting bonds in 1994, so they [want] to lock in now. We're playing right into that 1994 forecast."

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