News Releases

October 10, 2007

Investment Strategy by Treasurer’s Office to Support Affordable Housing

MONTPELIER, Vt.—In what is described as a “win-win” for Vermonters, the Office of the State Treasurer will invest $2.5 million in a community investment fund that offers solid returns and more capital for affordable housing loans in the state.

As part of an effort to invest state funds in ways that support economic and community development, the State Treasurer’s Office has agreed to invest with Access Capital Strategies to manage a portion of Vermont’s Trust Investment Account. Access Capital’s mission is to invest in debt securities that support affordable housing, job creation and community development that serve low- and moderate-income individuals and communities throughout the U.S. Vermont’s $2.5 million will be invested in-state. Investment returns are based on a national portfolio.

“The aim is to increase the pool of available capital funds for affordable housing in Vermont,” said State Treasurer Jeb Spaulding. “As Access Capital seeks investment opportunities for these funds, it will create new lending opportunities for local banks which will, in turn, make available more mortgage loans for low- to moderate-income homebuyers.”

Access Capital invests in mortgages to homebuyers making less than 80 percent of an area’s median income. With the median income reported for all Vermont households now at approximately $48,500, the investments would expand home mortgage loan opportunities for households making, on average, less than $39,000 a year. The targeted mortgage-backed securities structured for purchase by the fund are AAA-rated and are usually guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. Fund guidelines also allow the investment of dollars in multi-family affordable housing, small business lending, and other projects that support community development.

Access Capital will work with Vermont lending institutions to create mortgage loans that qualify for backing by U.S. government agencies. These federally-qualified mortgage loans are then bundled into a single security that becomes part of the nationally invested Access Capital portfolio. As a result, the Vermont Trust Investment Account funds will be diversified and will have the full impact of being invested in Vermont.

“The recent loan default problems in the sub-prime mortgage lending market have tightened the availability of funds for home loans to low-income households. However, unlike in the sub-prime lending market, potential homebuyers must go through a tougher loan approval process before being granted a federally-qualified mortgage. Since the loans structured and purchased by Access Capital are federally-qualified mortgages, the investments are more secure,” Spaulding explained. “Both the potential homebuyer and lender benefit from a careful examination of what loans are in the best interest of all mortgage partners.”

The need for affordable housing in Vermont remains high. According to a 2007 update released by the Vermont Housing Council and Vermont Housing Awareness Campaign, the median price of a single-family home in Vermont is approximately $197,000. A Vermont household would need an annual income of $66,000 to purchase that home. Sixty-seven percent of Vermont’s households have incomes below that figure.

Vermont’s State Legislature created the Trust Investment Account (TIA) in 2000 for the purpose of investing specific restricted funds. Funds that comprise the TIA include the Tobacco Trust Fund, Higher Education Endowment Trust and various other smaller trust funds. As of June 30, 2007, there was $55.4 million in the TIA.

“I am pleased that we can use our resources to invest in Vermont,” said Spaulding. “By utilizing the expertise of Access Capital, we can wed our investment returns with community needs that benefit everyone.”

Access Capital’s Community Investment Fund invests in AAA credit quality community economic development investments, usually specially created mortgage-backed securities. The company began utilizing mutual funds as a community investment vehicle in 1998. Since its inception in 1998, the fund has purchased securities made from loans that provided financing for more than 8,000 low- and moderate-income homebuyers, project loans for 4,400 affordable rental housing units, loans to 145 small businesses, and more than 10 other economic development projects. The fund has a portfolio of community investments in 45 states and territories.

Source: Office of the State Treasurer
Last Updated at: October 10, 2007 10:48:28