Mortgage Revenue Bonds for Single-family Housing

• Mortgage revenue bonds, also called MRBs, can be sold to finance single-family mortgage loans. They have become widely used to help fund mortgages with below-market interest rates for first-time, low-income homebuyers.
  
  According to Freddie Mac, which buys mortgage revenue bonds, the debt helps housing finance agencies assist borrowers who might otherwise be unable to purchase a home. They also facilitate the revitalization of communities through increased homeownership.
  
  

Mortgage Revenue Bonds for Multifamily Housing

• Mortgage revenue bonds can also be used to finance the construction of multifamily housing projects where a specified proportion of the units will be rented to moderate- and low-income families. Sometimes the proceeds can also be used for housing dedicated to senior citizens.
  
  The agency notes that MRB proceeds can provide financing either directly or through a loans-to-lenders program. They can be secured, in whole or in part, by federal agency guarantees or subsidies.
  
  

How Mortgage Revenue Bonds Are Sold

• Mortgage revenue bonds are tax-exempt bonds that state and local governments issue through housing finance agencies.
  
  Mortgage revenue bonds are sold by state and local governments through housing agencies. The housing agency acts as a conduit, which means the bonds are sold by the government entity on behalf of that housing agency.
  
  Housing agencies wishing to use mortgage revenue bonds work with their state or local governments to work out the terms of the deal. That includes determining if any enhancements should be a part of the transaction to make it more attractive to potential investors. Insurance or letters of credit are some of the options that are available to enhance the sale of mortgage revenue bonds.
  
  

Security for Mortgage Revenue Bonds

• The bonds that are sold are typically special revenue obligations of the housing agency, and the housing agency secures them. The mortgage revenue bonds sold for the housing agency are not a debt of the government entity the housing agency works with.
  
  Because they are not secured by the government entity, these bonds sometimes are viewed as carrying more risk than general obligation bonds that are backed by a government.
  
  MRB proceeds are used to purchase or originate mortgage loans at below-market rates, explained Dr. Robert Dietz in an article titled "Mortgage Revenue Bonds and Mortgage Credit Certificates."
  
  The Municipal Securities Rulemaking Board (MSRB) further notes that the repayment of the mortgages may be further secured by federal programs or through private mortgage insurance.