State and local governments sell tax-exempt Housing Bonds, commonly known as Mortgage Revenue Bonds (MRBs) and Multifamily Housing Bonds, and use the proceeds to finance low-cost mortgages for lower income first-time homebuyers or the production of apartments at rents affordable to lower income families. MRBs have made first-time homeownership possible for almost 3 million lower income families, approximately 100,000 every year. Multifamily Housing Bonds have provided financing to produce nearly 1 million apartments affordable to lower income families.
Each stateâ€™s annual issuance of Housing Bonds is capped. The 2013 limit is $95 multiplied by the state population, with a state minimum of $291.87 million. MRB mortgages are restricted to first-time home buyers who earn no more than the area median income (AMI). Larger families can earn up to 115 percent of AMI. In 2011, state HFAs provided MRB mortgages to families with an average income of $38,967, just 77 percent of the national median income. The price of a home purchased with a MRB mortgage is limited to 90 percent of the average area purchase price.
Multifamily housing bond developments must set aside at least 40 percent of their apartments for families with incomes of 60 percent of AMI or less, or 20 percent for families with incomes of 50 percent of AMI or less.
The Housing and Economic Recovery Act (HERA) of 2008, championed by NCSHA and its allies, provided $11 billion in new Housing Bond Authority to be available through 2010 and made a number of additional changes, including exempting Housing Bond interest from the Alternative Minimum Tax (AMT).
The recent economic crisis significantly diminished investor interest in MRBs and therefore severely limited the amount of funds available to finance affordable home mortgages and multifamily loans. During this period, NCSHA works with the Administration and Congress to support HFA efforts to issue more Housing Bonds and address their variable rate debt liquidity needs. In October 2009, the Obama Administration announced its HFA Initiative, through which the Treasury agreed to purchase tax-exempt housing bonds from state and local HFAs to help them weather the weak credit markets created by the crisis. This program helped HFAs provide 135,000 affordable mortgages to responsible low-and-moderate income borrowers and supported the development and rehabilitation of 40,000 units of affordable housing.