FOR IMMEDIATE RELEASE
October 4, 2001

CONTACT, Katie O'Rourke
804-343-5520
katie.orourke@vhda.com

The Virginia Housing Development Authority recently received a national award for its innovative Mortgage Backed Security initiative to finance single family mortgages.

At the 31st annual conference of the National Council of State Housing Agencies, VHDA bested nine other entrants to receive the Program Excellence award in the Management Innovation: Financial Management category. NCSHA’s conference was held Sept. 29 through Oct. 2 in Boston.

“VHDA is honored and excited to receive this national award recognizing our innovative mortgage-backed security financing program” said Susan Dewey, executive director of VHDA.

The Mortgage Backed Security entry described how VHDA solved the problem of finding enough taxable bond money at rates low enough to finance the authority’s Flexible Alternative loan program, which offers 100 percent loan-to-value loans to moderate-income homebuyers. VHDA offers other mortgage loan programs using tax-exempt bond funds for lower-income homebuyers.

The Flexible Alternative loan program, which VHDA began in 1998, is funded completely by taxable debt and receives no federal or state funding. The Flex Alt program was in danger because the spread between the bond rates and the mortgage rates started to shrink to the point where it began to become infeasible to continue the loan program.

Flex Alt loans are especially significant for homebuyers in higher-income areas of the state, such as Northern Virginia. The Flex loans allow up to 100-percent loan-to-value with no mortgage insurance (and as a result, lower monthly payments), expanded qualifying ratios, and Flex borrowers don’t have to be first-time homebuyers.

“Our Flex program is an important part of VHDA’s mortgage loan product line. Flex loans allow VHDA to serve borrowers who might otherwise be unable to purchase a home due to lack of down payment money,” Dewey said.

Although no other housing finance agency had raised money on the MBS market, VHDA knew this was a potential source of funding because larger issuers, such as Fannie Mae, were raising funds at a lesser rate than could be obtained on the traditional taxable municipal market. By turning to this much larger MBS market, VHDA saved approximately 1/2% a year. This amounts to a cost savings of $12 million for the five sales totaling $527 million that the authority has conducted since January.

“VHDA’s innovative MBS program has allowed Virginia mortgage borrowers to save over $12 million in less than one year. This translates into greater home affordability for our borrowers” Dewey said.

The Virginia Housing Development Authority is Virginia’s state housing finance agency. VHDA receives no state funds. VHDA issues bonds to raise private capital to provide low-interest rate home loans and other home loan financing alternatives to Virginians seeking safe, decent, affordable housing.