The Obama administration launched a new initiative Monday aimed at supporting affordable mortgages, backed by the federal government.

Several cabinet agencies announced a new program to provide assistance to state housing financing agencies (HFAs), administered in part by the government-run Fannie Mae and Freddie Mac companies.

The U.S. departments of Treasury and Housing and Urban Development (HUD), along with the Federal Housing Finance Agency (FHFA), will allow state financing agencies to issue new bonds, while Freddie and Fannie will provide the state funds with credit lines, which the federal government will backstop.

"State and local housing financing agencies play a critical role in our housing financing system," said Assistant Treasury Secretary Michael Barr, who characterized the program as part of President Barack Obama's bid to maintain affordable housing in the midst of last fall's credit crisis.


The program puts the government in the interesting role of using Fannie and Freddie, which were taken into conservatorship last year in the midst of the mortgage crisis, of administering the credit lines to the state agencies.

But cabinet officials would not say Monday how much credit would be extended to the state agencies, or to what extent the federal government would be on the hook for any losses on mortgages. Barr emphasized repeatedly, however, that the program would be deficit neutral, financed by bond sales and service fees to HFAs who participate in the program.

"The program will be sized to meet demands from HFAs," Barr explained, refusing to provide estimates of the program's size. "We really felt it was appropriate to build estimates from the program from the ground up."

Administration officials maintained Monday that the program would not mirror those from Fannie Mae and Freddie Mac in the late 1990s that inflated the mortgage market, saying the state agencies would be more judicious about lending to subprime borrowers.