US govt to help state housing agencies -adviser

The federal government is set to release a plan to help state housing agencies make low-interest home loans, answering the agencies' recent pleas for assistance, a member of the U.S. Department of Housing and Urban Development will tell Congress on Thursday.

According to testimony from William Apgar, senior adviser to the department's mortgage finance secretary, HUD is working with the White House and Treasury to address the agencies' inability to issue bonds, the lack of liquidity support available to them and their balance sheet stress.

"The sidelining of HFAs could not come at a worse time for our housing and economic recovery," Apgar says. "HFAs are a key source of affordable, flexible mortgage money for lower-income first-time home-buyers."

The housing rescue plan passed in 2008 gave the agencies $11 billion extra in bonding authority.

The agencies issue debt in order to finance mortgages at low interest rates, but for many months they have been frozen out of the market. Investors are nervous about anything related to mortgages and the two large traditional buyers of the debt -- mortgage giants Fannie Mae and Freddie Mac -- have been unable to invest as they face their own troubles.

While Apgar could not give details about the forthcoming plan, said that Fannie Mae and Freddie Mac have consulted with its drafters and that state agencies project they could "issue $33 billion in tax-exempt bonds" should the market begin functioning properly again.