LOS ANGELES-In the first transaction of its kind, Fannie Mae and the California Housing Financing Agency have struck a complex bond deal that could keep thousands of federally subsidized affordable rental units from being converted to market-rate housing.

Fannie Mae is the biggest player in the nation’s secondary mortgage market. The CHFA is a state organization established to encourage the development, purchase and retention of affordable housing in the Golden State.

As part of the complex plan, Fannie Mae sold about $274 million worth of federally backed Section 236 mortgages to CHFA. By purchasing the loans, CHFA now has the opportunity to preserve the underlying apartment buildings for affordable rental housing.

The deal is aimed at stemming the growing number of apartment owners who are opting out of the federal subsidy program so they can raise rents to market levels. About 43,000 affordable apartment units in California alone could conceivably be removed from the federal rolls, Fannie Mae says.

The new agreement “gives us the opportunity to save over 23,300 units that were at risk of converting to market rental rates,” says Ted Chandler, vice president of housing and community development in Fannie Mae’s regional office in Pasadena. “As a result of this transaction, CHFA is now in a position to negotiate a refinancing of these at-risk properties with their owners and preserve the properties’ long-term affordability.”

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