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Dear Friends of Affordable Housing,

The real estate and mortgage industries are going through profound historic changes that are significantly impacting the operations of all housing-related organizations, including VHDA. In spite of this, our long-term goals of addressing the housing needs of underserved households and communities, as well as sustaining organizational capacity, remain unchanged. We are responding to current challenges by focusing on two critical priorities: delivering core programs and services and managing financial risks.

Delivering core programs and services. The housing assistance VHDA provides is a critical part of stabilizing housing markets and addressing Virginia’s affordable housing needs. We’re developing and implementing strategies to maintain the flow of affordable mortgage capital to support the needs of first-time homebuyers. Through our FHA Plus program, we’re offering first mortgage loans under reasonable underwriting terms and conditions, coupled with second mortgages for down payment and closing cost assistance. We’re also expanding our priority on homebuyer education to both ensure the readiness of first-time buyers to assume the responsibilities of home purchase, as well as to help re-instill confidence in the traditional value that homeownership can provide: security of tenure, stability of housing costs through long-term, fixed rate financing, and control of one’s living environment. We’ll be using these tools—affordable mortgage credit and strong homebuyer education—to assist the Virginia Department of Housing and Community Development, Prince William County and Fairfax County in effectively implementing the new federal Neighborhood Stabilization Program.

VHDA is also working with non-profit and for-profit developers to structure feasible rental developments in a difficult market environment. We’re using our internally generated REACH Virginia program subsidies to help fill the gap facing developers participating in the Low-Income Housing Tax Credit (LIHTC) program that has resulted from the weakened investor market and falling credit prices. In the coming months, we’ll be implementing the provisions of the federal stimulus bill that provide gap funding and other assistance to address the feasibility issues facing LIHTC developments.

Managing financial risk. VHDA is committed to the long-term sustainability of the housing opportunities we finance. For the first-time homebuyers we serve, that means an ongoing commitment through in-house loan servicing and strong loss mitigation efforts that keep borrowers in their homes. VHDA has not engaged in subprime, ARM, option payment or limited document lending. Therefore, we continue to experience default rates below national and state industry averages. Nonetheless, as unemployment rises, increasing numbers of VHDA borrowers are likely to experience difficulty in meeting their mortgage obligations. In the coming months, we’ll be setting aside additional resources to assist borrowers who encounter difficulties beyond their control in order for them to maintain homeownership.

In the short-term, as rental markets weaken, more owners of affordable rental developments will also face financial challenges. We’re taking a proactive approach to loan servicing and asset management to identify problems and solutions early on, and provide assistance to address property needs so that the quality and viability of affordable rental opportunities are maintained.

The challenges VHDA faces are shared with our many housing partners. We remain confident that by focusing on the critical priorities we’ve identified, and continuing to support the partnerships we’ve built, we can successfully navigate these difficult times and continue to address the crucial housing needs of Virginians.

-- Susan Dewey 

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