DEFINITION of Tandem Plan
A Tandem Plan is a mortgage purchase program subsidized by the U.S. government. Tandem loans provide monetary assistance to builders and developers of non-profit public housing. Under the Tandem Plan, the Government National Mortgage Association (GNMA / Ginnie Mae) buys mortgages at a discounted market price and then sells them through the Federal National Mortgage Association (FNMA / Fannie Mae) and the Federal Home Loan Mortgage Corp. (FHLMC / Freddie Mac).
BREAKING DOWN Tandem Plan
Under the Tandem Plan, GNMA foots the difference between the purchase and sale price of the mortgages that it buys. This type of structure allows home buyers to receive low interest rate loans, often to those who would not be able to afford them otherwise.
How Housing Subsidies Work
"The program is versatile as to the types of housing which can be provided and the types of tenants which can be served. It permits row, walk-up, elevator, and grouped or scattered single family construction. Projects may also be developed in conjunction with other Federal or State programs," the agency said on its website. "FNMA participation in construction advances for up to 95% is available whether the commitment contracts are held by FNMA or GNMA."
Interest reduction payments may be made for a rental or cooperative housing project, owned by a private nonprofit entity, a limited distribution entity, or a cooperative housing corporation, which is financed under a State or local program which provides assistance through loans, loan insurance, or tax abatement. To qualify for interest reduction payments, a project must be submitted for approval prior to completion. Projects need not be financed with HUD-FHA insured mortgages, and HUD-FHA will recognize the organization and operation of the project under state or local programs to the extent they are not inconsistent with the National Housing Act, according to the agency.
New Tandem loans are no longer being funded. Numerous other programs aimed directly at buyers have since been implemented, including the Homeownership and Opportunity for People Everywhere (Hope I), which helps low-income people buy public housing units by providing funds that nonprofit organizations, resident groups, and other eligible grantees can use to develop and implement homeownership programs.
The housing choice voucher program is the federal government's major program for assisting very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market. Since housing assistance is provided on behalf of the family or individual, participants are able to find their own housing, including single-family homes, townhouses and apartments. The participant is free to choose any housing that meets the requirements of the program and is not limited to units located in subsidized housing projects, HUD stated.