u.s. launches aid for state and local housing agencies

Reuters | The Obama administration on Monday launched a program to help the depressed U.S. housing market by effectively allowing state and local housing finance agencies to borrow from the U.S. Treasury.

The initiative, announced as new data showed a downturn in homebuilder sentiment, aims to restart a source of mortgage financing for first-time and low-income buyers that has been largely shut down by credit market gridlock.

Described as temporary by the U.S. Treasury, the Department of Housing and Urban Development and the Federal Housing Finance Agency, the program will allow state and local agencies to issue bonds through government-sponsored mortgage finance giants Fannie Mae and Freddie Mac. Those bonds would then be purchased by the Treasury.

"Through this initiative, the administration aims to help ... jump start new lending to borrowers who might not otherwise be served and to better support the financing costs of their current programs," U.S. Treasury Secretary Timothy Geithner said in a statement.

The U.S. housing market, which was at the epicenter of the global credit crisis, has shown signs of stabilizing, but it has been bolstered by an $8,000 tax credit for first-time buyers that is set to expire at the end of November.