Editorial By TN State Rep. Charlie Baum of Murfreesboro:
Even in good economic times, finding affordable housing can be challenging. Finding adequate housing is even more challenging for many families now, due to financial stress brought about by the Covid-related economic downturn.
I am pleased to report a bill I sponsored that provides additional financial resources to first-time homebuyers and veterans passed in the Tennessee State House and Senate and became law July 1.
This legislation (House Bill 1622) authorizes the Tennessee Housing and Development Agency (THDA) to provide more than $1 billion in additional financial assistance to low- and moderate-income households and veterans in Tennessee buying their first home. House Bill 1622 does this by raising the THDA’s maximum dollar amount of allowable outstanding bonds from $2.9 billion to $4 billion. Raising the cap makes more resources available for potential first-time homebuyers.
The THDA will obtain these funds from financial markets by issuing bonds to investors. The State of Tennessee faces no cost or legal obligation on these bonds.
The THDA uses a conservative approach to ensure solvency. For example, the THDA only underwrites 30-year fixed rate mortgages. No adjustable-rate mortgages. All THDA loans are secured either with a federal housing administration (FHA) guarantee or private mortgage insurance. The THDA requires higher credit scores and requires lower debt-to-income household ratios of its clients than many other government-sponsored enterprises, such as Ginnie Mae or Freddy Mac.
Since its establishment by the General Assembly in 1973, the THDA has worked to fulfill its mission as Tennessee’s affordable housing lender by issuing below-market interest mortgage loans to low- to moderate-income families and veterans in all 95 Tennessee counties.
The THDA uses its resources to do more than facilitate homebuying. The THDA provides homebuying-related education to first-time homeowners; it offers financial assistance with repairs; and the THDA monitors whether its clients’ mortgages are being paid in a timely fashion.
In response to Covid, the THDA is providing funding to Continuum of Care (CoC) programs in the state. CoC programs help individuals who have become homeless or are in danger of becoming homeless.
This is an example of Tennessee’s state government using conservative economic principles and financial markets to help those in need. The lack of affordable housing in our state’s fast-growing communities is a real problem. It is encouraging to see government work effectively to address this need. I appreciate the strong support my colleagues in the Tennessee General Assembly and Governor Bill Lee have provided for this important legislation.
State Rep. Charlie Baum (R-37th District) is a professor of economics at Middle Tennessee State University. He lives in Murfreesboro and serves on the House Finance, Ways and Means, Education and Consumer and Human Resources committees.