May 14, 2015
For 41 years the East Baton Rouge Mortgage Finance Authority helped first-time homebuyers secure financing at far below market rates. But when the Federal Reserve instituted its so-called quantitative easing policy in the wake of the 2008 recession—driving interest rates to historic lows—the agency sort of lost its reason for being.
“Agencies like ours could not issue mortgage revenue bonds low enough to make them attractive, so we started reinventing ourselves,” says Executive Director Mike Airhart. “We started looking at how we can help in the marketplace and what other kind of multipurpose financing we can do.”
This month, the agency rebrands itself with a new name—the Capital Area Finance Authority—a new logo and a vastly expanded mission that will enable it to finance a variety of large-scale public projects in the nine-parish region.
“If our elected leaders ever decide to do a loop and bridge around Baton Rouge, for example, we would love to have the opportunity to finance that,” Airhart says. “We can step in in places and do things where maybe a private market investor can’t or doesn’t want to take on the risk.”
Created in 1974, the finance authority’s original mission was to help mostly low- and moderate-income homebuyers in East Baton Rouge Parish by issuing bonds and using the proceeds to provide low-income mortgages as well as assistance with down payments or closing costs. Over the years, the agency has provided more than $1 billion in below-conventional-market-rate funds to more than 16,000 households.
But as it became easier for qualified buyers to secure financing from conventional lenders, the agency needed to find a new revenue stream. Last fall, the authority went to the Louisiana Bond Commission and received approval to expand both its geographic boundaries and its product offerings. Now, instead of functioning strictly as a conduit for below-market-rate housing loans, it will operate as a general finance authority for the nine-parish region.
In its new capacity, the agency will be going head-to-head with the Louisiana Public Facilities Authority, the Louisiana Community Development Authority and the East Baton Rouge Industrial Development Board for the opportunity to finance projects. But Airhart says the agency has been active in economic development efforts throughout the region over the past 10 years and has developed long-term relationships with parish leaders, who will now hopefully want to do business with an entity they know and trust. Also, CAFA will be competitive, which could mean it will offer lower fees than LPFA or LCDA if necessary.
When Airhart took over the agency last summer, among his goals was to create new revenue streams for the authority while staying true to its mission of helping the community. With the official rebranding this month as CAFA, Airhart says his agency is well on his way to meeting that goal.
“Now, we’re in a position to help the economic health of the entire region,” he says.
This article was written by Stephanie Riegel and originally published by the Baton Rouge Business Report on May 13, 2015.