Leahy Calls On Fed Chief
To Help Spur Lending
For Affordable Housing
(FRIDAY, Dec. 19) -- Senator Patrick Leahy (D-Vt.) and
Senator Herb Kohl (D- Wisc.) are leading 19 senators in urging Federal
Reserve Chairman Benjamin Bernanke to use funds at his disposal to
increase the availability of loans through the state Housing Finance
Agencies (HFAs) for low- and middle-income first-time homebuyers and
refinancing borrowers.
While lending programs at the Vermont Housing Finance
Agency continue to operate, across the country many HFAs have had to
limit, or in some states even halt, their help to these homebuyers.
In the letter, Leahy and Kohl called on Bernanke to use all tools at his
availability, including the newly created Term Asset-Backed Securities
Loan Facility, to help troubled homeowners stay in their homes and
assist ailing housing markets across the country. Leahy believes
that these steps, helping to ensure that HFAs have access to reasonably
priced capital, would help these agencies so they can continue providing
vital financing in the housing market. The text of the Leahy-Kohl
letter, also signed by Senator Sanders (I-Vt.), is below.
# # # # #
December 18, 2008
The Honorable Ben S. Bernanke
Chairman, Federal Reserve System Board of Governors
20th Street and Constitution Ave, NW
Washington, DC 20551
Dear Chairman Bernanke,
We write out of concern that the current economic environment is having
a negative impact on the ability of lower and moderate income Americans
to secure loans to purchase homes. The current situation has had a
particularly negative impact on the country’s Housing Finance Agencies
(HFAs) that have traditionally played a key role in serving this
population. We urge you to use a variety of steps, including your
authority under section 13(3) of the Federal Reserve Act, to permit
Federal Reserve Banks to support the HFAs by making loans to housing
finance agencies based on the securities of their mortgage revenue bonds
and, where necessary, help provide them with increased liquidity.
Due to the frozen credit markets, HFAs have had difficulty both finding
investors for their bonds and new liquidity providers. As a result,
multiple agencies have had to suspend or limit mortgage lending
programs, and without assistance, many more will follow suit. While
Congress and the Administration recently increased the volume cap of
housing bonds which can be issued by HFAs and expanded the use of the
proceeds from the bonds, the economic environment has basically halted
the purchasing of mortgage revenue bonds (MRBs).
The Federal Reserve could and should use all tools, including the newly
created Term Asset-Backed Securities Loan Facility, under its authority
to support the MRB market. Additionally, the recently announced
consumer credit initiative should be utilized to instruct the housing
GSEs to implement measures to support the state HFAs. This would
fulfill Congressional initiatives to use HFAs as a way to help troubled
homeowners stay in their homes and assist ailing housing markets across
the country.
Congress and the Federal Government need to work together to find
creative and practical solutions to spur our economy and help Americans
through this economic down turn. Housing finance agencies are stable
entities which invest directly into a states’ economic development.
With the negative impact the credit crisis has had on current HFA
lending programs we ask you to take expedient action to explore options
to help these agencies so they may continue providing important
financing in the housing market.
Sincerely,
PATRICK LEAHY
United States Senator
HERB KOHL
United States Senator
(and 17 additional senators)