Role of Qualified Mortgage Bonds in Providing Home Ownership Opportunities

GAO discussed whether Congress should extend the issuance authority for qualified mortgage bonds, which provide fixed-rate loans at below-market interest rates to assist first-time home buyers. GAO noted that: (1) bond financing provided only limited home ownership opportunities and made only a marginal difference in mortgage affordability; (2) most assisted buyers probably could have qualified for unassisted loans; (3) bond-financing costs greatly outweighed the benefits; and (4) housing agencies may find it difficult to provide interest rates below the conventional rate. GAO believes that: (1) qualified mortgage-bond-financed loans are ineffective and inefficient in assisting home buyers; and (2) if Congress chooses to extend bond issuance authority, it should limit assistance to those who could not otherwise purchase a home.