On May 31 HUD said it would like to reach some affordable housing risk-sharing agreements with Fannie Mae and Freddie Mac, and it didnt waste any time accomplishing that goal. HUD Secretary Henry Cisneros announced a watershed joint HUD-GSE demonstration program June 15. The first-of-its-kind venturewhich implements a 1992 law authorizing those risk-sharing agreementswill provide financing for as many as 12,500 units of multifamily housing, with Fannie and Freddie using their lending networks to purchase, service and manage the loans. HUD Assistant Secretary for Housing Nicolas Retsinas said HUD would also consider giving the GSEs partial credit for the loans toward their congressionally mandated affordable housing goals. Retsinas said HUD will not be assigned defaulted mortgage loans or take possession of any foreclosed properties, leaving those responsibilities to the GSEs. HUD will reinsure the loans purchased by Fannie and Freddie and, in the event of a loss, the GSEs will determine the amount of loss and it will be split equally with HUD. The agreement also calls for the GSEs to pay a premium for each reinsured loan. Under the program, 15,000 units will be made available for risk-sharing arrangements. Fannie will handle 7,500 units, and Freddie will deal with 5,000. Both, however, must expend that allocation within five years of the agreement. The remaining 2,500 units will be available to other risk-sharing parties. The program is open to loans for new construction, substantial rehabilitation, acquisition or refinancing. Eligible loans will have at least 20% of the units affordable to families whose incomes are 50% of the area median income, or 40% of the units affordable to families whose incomes are 60% of the area median income, and may not exceed 40 years in duration. Each property must also be designated for affordable housing use for 15 years following the agreement. Although the programs scope is limited, Retsinas said HUD was ready to look at removing the ceiling on the number of units eligible.
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