Iowa Finance Authority (IFA) officials say they’re eager to use a new federal program that will enable them to offer more affordable mortgage interest rates to first-time home buyers in Iowa.

The initiative, announced Monday by the U.S. Treasury Department, features two components: a bond purchase program to support new lending to housing agencies by Fannie Mae and Freddie Mac, and a liquidity program to improve access by housing agencies to credit sources for their existing bonds.

The program will use authority provided to the Treasury Department under the Housing and Economic Recovery Act of 2008; the cost of the program will be covered by fees paid by the housing finance agencies.  The government said the new effort is designed to provide hundreds of thousands of affordable mortgages for working families, and enable the development and rehabilitation of tens of thousands of affordable rental properties.

State housing finance agencies have been virtually frozen out of the housing bond market for months because they have been unable to find investors willing to purchase their long-term, fixed rate bonds. According to the National Council of State Housing Agencies, housing finance agencies could issue more than $30 billion in housing bonds over the next two years in response to growing demand by first-time home buyers.

“It’s really exciting news for the Iowa Finance Authority, and something we’re still learning about,” said Shawna Lode, a spokeswoman for the agency.

The number of loans financed by the IFA through its participating network of lenders has decreased significantly over the past two fiscal years because it has had to increase interest rates as access to credit declined. In fiscal 2009, which ended June 30, the IFA made just over 2,000 loans totaling $114 million, less than half its lending the volume the previous fiscal year.

“So clearly, this program has not been competitive in the past several years, and we hope this initiative will give us an opportunity to be more competitive in the mortgage market,” Lode said. The IFA currently charges rates of 5.25 and 5.75 percent for its first-time home buyer programs.

The new program is designed to provide temporary support to local housing finance agencies, which are expected to resume using market sources of financing as quickly as possible.