Unable to sell bonds to finance its lending programs because of the nationwide credit crisis, the Colorado Housing and Finance Authority has suspended two lending programs and raised rates on its flagship mortgage program.

The state-created agency, which receives and uses no tax money, has made more than $450 million a year available in mortgages during the past three years to first-time and low- to moderate-income borrowers statewide. But the agency's lending volume has dropped by two thirds since Oct. 9, when it raised interest rates on mortgages it finances by 0.75 percentage points as its own financing costs have soared.

The authority also has put its small-business lending and multifamily housing finance programs on hold until it can issue bonds to finance those programs as well as its single-family mortgage program, said Cris White, CHFA's chief operating officer. The small-business and multifamily programs likely will resume by early next year, but interest rates for the single-family mortgage program aren't likely to go back down soon, he said.

All of CHFA's programs were financed by issuing both tax-exempt and taxable variable-rate bonds, but the market for tax-exempt and government-issued bonds has virtually disappeared in the past two months, White said. The authority last issued bonds in June, but hopes to complete another issue by year's end. Officials haven't decided the amount to be issued or what programs would receive the funds, he said.

"All funding commitments we have made in any of our programs will be honored, but we cannot make new commitments on either the small-business or multifamily programs," White said. "The market for variable rate bonds has frozen up. While it is beginning to thaw, we raised the rates on our single-family program anticipating that when it does, the rates will be higher" than in June.

The increase boosted rates on mortgages financed by the authority to 7⅜ percent, or about 1.75 percentage points higher than current rates on traditional mortgages, making them far less attractive to borrowers, White said. The authority's mortgages also include an interest-free second mortgage of up to 3 percent of the purchase price of the home being financed, which is designed to serve as the borrower's down payment, he said.

The higher rates on CHFA mortgages aren't likely to have a "substantial impact" on the Colorado Springs -area housing market because the increase likely will be temporary, said Jay Gupta, past president of the Pikes Peak Realtors Association and managing broker of Gloriod & Associates, a Springs residential real estate agency. Also, he said, use of the loans CHFA finances is limited to a "smaller number of transactions in the marketplace."

CHFA has made about $360 million in mortgages through Sept. 30 under its single-family program, including more than a third made to first-time buyers for foreclosed homes, White said. The authority, which employs 175, also has made $75 million in small-business loans and more than $50 million in mortgages on multifamily properties during the same period and more than $3 billion in loans of all types during its 35-year history.

El Paso County's program for first-time homebuyers also has been unavailable since early this year for similar reasons - investors don't want to buy the tax-exempt bonds that finance the 29-year-old program.

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Contact the writer: 636-0234 or wayneh@gazette.com