CROWNSVILLE -- In an effort to jump-start Maryland's economy by stimulating the housing business, the state housing secretary said this week that she is trying to pull together a $20 million fund to make loans to developers and builders of new single-family-home subdivisions.
"We're concerned about the health of the Maryland economy, and if homebuilding is in trouble, the economy is in trouble," Jacqueline H. Rogers, secretary of Maryland's Housing and Community Development Department, said in an interview.
Ms. Rogers said a financing crunch that has hurt the nation's residential developers continues in Maryland and that the industry could benefit from state intervention until banks and other financing sources resume their lending to developers.
"Lines of credit have dried up -- including lines of credit for those with previously established banking relationships," Ms. Rogers said.
Under a plan presented this week to the Federal National Mortgage Corp., known as Fannie Mae, a quasi-governmental agency that seeks to promote homeownership throughout the nation, the $20 million state fund would include $10 million of Fannie Mae capital, $5 million raised through the sale of taxable bonds by the state and $5 million pledged by local lenders.
Details are being worked out, Ms. Rogers said, but if the plan goes forward it could start this summer.
"Twenty million dollars is not a lot of money. But it's a beginning point for what could be more," the secretary said. She noted that although the state has been heavily involved in programs to encourage mortgage lending and to spur the construction of apartment units, this would be its first venture into lending for single-family homes.
Residential builders and developers are encouraging state involvement to help the faltering homebuilding industry.
"The credit crunch continues to be more severe in Maryland than the rest of the country as a whole," said Earl Armiger, president of Orchard Development of Ellicott City, a new-home development firm.
California's state employee pension fund is investing more than $300 million to spark residential development in that state. But when Maryland's housing secretary sought a much smaller investment for the same purpose from Maryland's state employee pension fund this year, the fund's investment committee rejected the idea.
"We were very disappointed that the pension fund was not as interested in residential development in Maryland as in buying oil and gas shares from Alaska," Ms. Rogers said.
In the wake of the rejection by the pension system, the state's deputy housing secretary, Patricia J. Payne, drafted a new proposal that included the possible sale of taxable state bonds, along with Fannie Mae funds and loans through local banks and thrifts.
Local financial institutions, many of which are reluctant to get involved in real estate lending, might be persuaded to participate in the fund if it also included financing from other sources, such as the state or Fannie Mae, Ms. Payne said.
If the program is successful, loans to developers and builders would be made for projects involving single-family homes selling for up to $127,500.