Federal Home Loan Bank of Atlanta Boosts Housing Market with Disbursement of More Than $9.4 Million in First-time Homebuyer Funding

/PRNewswire/ -- Federal Home Loan Bank of Atlanta (FHLBank Atlanta) announced today that it has disbursed in excess of $9.4 million to more than 1,000 recipients through its 2009 First-time Homebuyer Program (FHP), providing critical and timely economic support to the housing market. For each of the past 12 years, FHLBank Atlanta has offered the matching funds through its member financial institutions for down payment and closing costs of eligible first-time homebuyers in Alabama, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, and the District of Columbia.

Over 60 FHLBank Atlanta financial institutions accessed and closed down payment funds ranging from $1,882 to $10,000 to more than 1,000 homebuyers. Thanks to the funding, member financial institutions are able to expand their customer base, originate new mortgages, and attract new homebuyers into the market. The private funds -- derived from profits earned by the Federal Home Loan Bank of Atlanta -- serve as an attractive tool to bring more homebuyers into the market and also serve as a valuable form of equity that they can benefit from in the future.

Since the program's inception in 1997, FHLBank Atlanta has allocated more than $50 million to first-time homebuyers, which has allowed more than 9,000 families and individuals to purchase a home. FHLBank Atlanta estimates that for every $1 of FHP funding awarded, $17 is generated in new mortgage business for its member banks.

"FHP is stimulating home sales and mortgage lending in communities at a time when the housing market and the overall economy need this type of economic support," said Arthur Fleming, first vice president and director of Community Investment Services, FHLBank Atlanta. "Relationships created between first-time homebuyers and FHLBank Atlanta lenders are significant and can provide a strong base for recovery of the residential housing sector."

The 2009 FHP offering cycle opened April 1, 2009, and continued until the funds were fully disbursed to member institutions. Funds were provided on a first-come, first-served basis. Individual participants receiving FHP funds were required to complete a credit counseling program that includes educational training on the home-buying process including courses on household budgeting, mortgage financing, lending laws, and debt management.

The 2010 FHP offering will be announced in April 2010.


Some of the statements made in this announcement are "forward-looking statements," which include statements with respect to the Bank's beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, many of which may be beyond the Bank's control, and which may cause the Bank's actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by the forward-looking statements.

The forward-looking statements may not be realized due to a variety of factors, including, without limitation: legislative and regulatory actions, changes or approvals; future economic and market conditions (including the housing market and the market for mortgage-backed securities); changes in demand for advances or consolidated obligations of the Bank and/or the FHLBank System; changes in interest rates and prepayment speeds, default rates, delinquencies and losses on mortgage-backed securities; political, national and world events; and adverse developments or events affecting or involving other Federal Home Loan Banks or the FHLBank System in general. Additional factors that might cause the Bank's results to differ from these forward-looking statements are provided in detail in our filings with the Securities and Exchange Commission, which are available at www.sec.gov.

New factors may emerge from time to time, and it is not possible for us to predict the nature, or assess the potential impact, of each new factor on our business and financial condition. Given these uncertainties, we caution you not to place undue reliance on forward-looking statements. These statements speak only as of the date that they are made, and the Bank has no obligation and does not undertake to publicly update, revise or correct any of the forward-looking statements after the date of this announcement, or after the respective dates on which such statements otherwise are made, whether as a result of new information, future events or otherwise, except as may be required by law.

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Subprime Mortgages Didn't Necessarily Lead to More Homeowners: St. Louis Fed Analysis

/PRNewswire/ -- Proponents of subprime mortgages argued that this type of financing could encourage homeownership for people who otherwise couldn't afford to buy a house, but a recent analysis from the Federal Reserve Bank of St. Louis suggests that the number of subprime mortgage loans terminated between 2001 and 2006 outweighed the number of estimated first-time homebuyers who sought subprime mortgages.

The analysis appears in the March/April issue of Review, the St. Louis Fed's bi-monthly journal of economic and business issues, and was conducted by Yuliya S. Demyanyk, a senior research economist with the Federal Reserve Bank of Cleveland. The data analysis for this article was conducted when she was an economist in the Banking Supervision and Regulation Division of the Federal Reserve Bank of St. Louis.

Demyanyk focused on whether borrowers intended to keep their subprime mortgages long enough to substantiate an increase in homeownership or planned a quick exit strategy at origination, using subprime loans as bridge financing to speculate on house prices -- in other words, quickly sell the house for profit after its value increased.

Her research showed that loans originated between 2001 and 2006 generally lasted less than three years. In fact, almost half the loans exited the market either through pre-payment or default within the first two years of origination and about 80 percent did so within three years of origination.

Demyanyk said her results are consistent with an earlier study that showed the unusually high default rates among loans originated in immediate pre-crisis years (2006 and 2007) did not occur only months from origination because those subprime mortgages were much worse than all loans that originated earlier. The quality of loans was deteriorating for at least six consecutive years before the crisis occurred.

"Subprime mortgages were very risky all along," she said. "The extent of their risk, however, was hidden by the rapid appreciation in house prices, allowing termination of the mortgage by refinancing or pre-payment. When pre-payment became costly -- with zero or negative equity in the house increasing the closing costs of refinancing -- defaults took their place."

The number of defaults in the limited sample of subprime purchase-money mortgages within two years of origination is almost equal to the number of first-time homebuyers who took a subprime mortgage. "If the data for the rest of the market were available," said Demyanyk, "the number of defaults would no doubt be even greater."

Demyanyk's paper is available online at the St. Louis Fed's web site: http://research.stlouisfed.org/publications/review.

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