MFA asks lawmakers to back $135 million Housing Trust Fund boost and tests a 3% mortgage pilot

The New Mexico Finance Authority (MFA) told the oversight committee that a projected pipeline need of about $181 million, minus an anticipated $44.7 million severance tax bond allocation and $1.7 million in program income, leaves roughly $135 million in state funding required to advance down‑payment assistance, rental development and single‑family projects.

“From that, we subtracted what we anticipate will be the recurring funds…for a total of just under a $135,000,000 that we are requesting,” Director Izzy Hernandez said during a presentation to the interim committee. MFA staff described the fund’s recent growth — 72% of total Housing Trust Fund receipts arrived in the last three years — and production metrics showing more than 8,000 families assisted with about $166 million since recurring funding began.

As part of the legislative package, MFA outlined an attorney‑requested analysis of a proposed $200 million below‑market mortgage pilot that would offer a 3% fixed interest rate for eligible first‑time homebuyers. Under MFA’s modeling (using statewide AMI assumptions), a representative $280,000 sales price with a 3% mortgage produced an estimated principal, interest, taxes and insurance payment of about $1,600 — roughly $500 less per month than a market mortgage at ~6.25%.

MFA described how the pilot would work in practice: MFA would use its existing lender‑partner infrastructure. Participating lenders would underwrite and close loans, MFA would purchase the loans from lenders and then securitize them in the secondary market. MFA said the proposed $200 million would be state capital and that the state, as the investor, would bear ultimate risk, though loans would generally be guaranteed or enhanced by FHA, VA, USDA or conventional mortgage insurance where applicable.

The package also contemplates layered down‑payment assistance: a $20,000 soft second (due on sale, refinance or transfer) and an additional $10,000 from the Housing Trust Fund, for a combined $30,000 that MFA described as repayable rather than a grant. MFA staff said underwriting standards (credit scores, debt‑to‑income and other FHA or agency guidelines) would remain in force and that variable or interest‑only products would not be used.

Legislators pressed on risk and borrower qualification. Senator Craig Brandt asked who would hold the risk; Hernandez said the state would ultimately bear investor risk but that program structures and mortgage insurance would mitigate exposure. Senator O’Malley raised concerns about using gross income for qualification and urged attention to real household take‑home pay and costs such as childcare and vehicle insurance. MFA said the program would rely on national underwriting standards to preserve guarantee eligibility but intends to enhance down‑payment assistance to lower borrower payment burdens.

MFA staff estimated program income generated by repayments could return $12–$16 million in early years to help replenish the fund, but said sustaining the pilot would require future infusions if policymakers want the program to persist at scale. The committee did not vote on the pilot during the interim session but endorsed MFA’s legislative request for the Housing Trust Fund appropriation by voice vote.