Two Affordable Housing Programs Get a Boost : Securities: The U.S. will package below-market mortgages to provide a new source of funds for low- and moderate-income home buyers.

Low- and moderate-income consumers may find it easier to afford a home under a new program announced on Monday, which should make more money available to lenders who offer below-market-rate mortgages to qualified buyers.

Under the program announced by the Federal National Mortgage Assn., lenders will be able to pool their below-market mortgages and sell them to Fannie Mae, which in turn would package them into mortgage-backed securities. The “Fannie Mae Affordables,” as the securities are to be known, will provide a new source of mortgage funds to home buyers of modest means.

“We expect ‘Fannie Mae Affordables’ to be a great help to our members in providing low-cost financing to those that need it,” James Cirona, president of the Federal Home Loan Bank of San Francisco, said in a statement.

Those funds, however, will not be available until mid-July at the earliest because of a lengthy application and approval process that lenders must clear to qualify their loans with the Federal Home Loan Banks. It is not yet clear what, if any, special qualifying provisions have been created for applications from California, where home prices are significantly higher than the national average.

The newly created Fannie Mae Affordables are designed to enhance two programs--the Affordable Housing Program and the Community Investment Program--both created late last year by the Financial Institutions Reform, Recovery and Enforcement Act of 1989, known as FIRREA.

“What Fannie Mae is saying to lenders is if you participate in banks’ affordable housing programs and making below-market mortgages with the idea of selling them . . . we have developed a security to allow you to sell those mortgages. Most lenders like to make mortgages where there is a secondary market,” explained Jim Yacenda, community investment officer of the Federal Home Loan Bank of San Francisco.

“We wanted to create our own low income program; this not only relaxes underwriting criteria, but it provides a break in the interest rate,” Ken Sheffer, senior vice president of Standard Pacific Savings Federal Assn. in Newport Beach, which is in the process of making an application under the Affordable Housing Program.

Sheffer said he believes that banks may be able to borrow funds at 1.5% below market rates. “It sounds like a very small benefit, but when you think of the number of more people who could qualify with reduction of a percentage and half, that could mean a lot” to first-time home buyers.

Under the funding programs, the Federal Home Loan Bank subsidizes below-market rates for single family and multifamily housing from a pool of funds designated for assistance to low- to moderate-income buyers.

That pool of funds, the equivalent of 5% of the earnings of member FHLB banks, is estimated to total $78 million this year. That in turn could generate about $600 million in loans nationwide, according to Julie Gould, director of low income housing at Fannie Mae in Washington.

California accounts for about $20.2 million or 26% of the total pool. “We figure that on the average it (California’s share) may produce upwards of $150 million in below-market-rate financing in California, Arizona and Nevada, which is our district,” said Yacenda at the Federal Home Loan Bank of San Francisco.

Eligiblity for the loans is based on income. The Affordable Housing Program requires an income of no more than 80% of the median household income of an area, which is $38,000 in Los Angeles County and about $47,000 in Orange County.

The eligibility requirement for the Community Investment Program is 115% of the median income.