California’s Housing Finance Agency Faces Budget Crisis

December 24, 2008
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The budget crisis being faced by the State of California’s Housing Finance Agency has led to the suspension of the state’s down payment assistance and fixed-rate mortgage loan programs after being implemented for the past 30 years. A total of $1 billion worth of mortgage loans is being purchased every year by the Agency thanks to an investment account coming from state bond issues.

The agency said it has no choice but to suspend the program considering the $40 billion budget deficit faced by California.  With the state unable to issue bonds or commercial papers, a total of $3.8 billion worth of funds for infrastructure projects have been shut down by the Pooled Money Investment Board.

State Treasurer Bill Lockyer lamented the decision of the board where he sits as member but said they have no choice with “burning down” of the state’s fiscal house. Among those that will be hardly hit by the suspension are moderate and low income families.

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