In a new breakthrough, the Investment Mandate (IM) through which the Federal government will guide the activities of the National Housing Finance Investment Corporation (NHFIC) confirms that the NHFIC will be able to borrow up to $1 billion of Commonwealth funds to create a reserve pool from which it can lend to registered CHPs.
This ‘warehouse facility’ will provide bridging financing to CHPs until there are enough loans to warrant a bond issuance. While the final pricing of loans has not yet been revealed, this new development means that the NHFIC will be able to offer even cheaper finance than first thought, because it can source money through Commonwealth borrowing facilities, rather than just issuing bonds into the capital markets.
Accessing Commonwealth money up front also means that the NHFIC can process applications from CHPs for finance before it raises funds via a bond issuance. Over time, the NHFIC expects to be able to offer a range of different lending products as well. All of this is great news for CHPs and we look forward to seeing more details over the next few months.
There are a couple of other things worth noting. The Bond Aggregator has two aims – to provide cheaper finance to CHPs and to build institutional investor interest in a new asset class of affordable housing.
Over the longer term, the Bond Aggregator needs to be able to support itself. To meet all these objectives, the NHFIC will issue bonds to raise funds to repay the money that the Commonwealth initially tips into the NHFIC reserve pool and to raise more money for future CHP borrowing.
The IM is now published on the Federal Register of Legislation (search ‘investment mandate’).