NM housing authority agrees to spend $5M on buying down interest rates for new homebuyers

The New Mexico Mortgage Finance Authority on Wednesday agreed to direct $5 million of recent legislative funding toward reducing interest rates for low- and middle-income homebuyers, a move officials hope will spur more housing development. 

The authority, also known as Housing New Mexico, received roughly $50 million during the recent legislative session toward its Affordable Housing Trust Fund, which historically has provided down-payment assistance, as well as other grants and low-interest loans, for low-income homebuyers.

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But Chief Lending Officer Jeff Payne told board members Wednesday that the trust fund could have a bigger impact on mortgage affordability by targeting interest rates, which have steadily risen since the COVID-19 pandemic and ensuing inflation. 

The board agreed to launch a pilot program that will pay to knock 1% off mortgage rates for roughly 400 homebuyers, as long as they meet income requirements; are using the home as a primary residence; and are buying a home built within 12 months of the purchase date. 

Payne calculated that, for a $300,000 home, the authority would have to pay about $12,000 to reduce a mortgage rate from roughly 6.3% to 5.3%. Doing so would save a homeowner about $180 a month, equating to savings of about $2,200 a year and nearly $70,000 over the life of the 30-year mortgage.

In contrast, an MFA program that reduced the amount of the loan for that same home by $12,000, either through down-payment or other assistance, would only reduce a homeowner’s monthly mortgage payment by about $70, or about $840 a year, Payne calculated. 

The pilot program could launch as soon as July, Payne said. He said he is unaware of any other state that uses taxpayer funds to buy down interest rates, he said, and authority officials will re-evaluate the program once all the funding is spent to “tweak whatever we think is not working with some of the feedback that I’m sure we’ll receive.”

The program received enthusiastic support from board members, including State Treasurer Laura Montoya. 

“The buydown is actually a game-changer for people who are middle class, that are right on the threshold,” she said. “They make decent enough money, but because of today’s market, are not able to think of the idea of having their own home and building their own home as generational wealth.”

The Legislature approved more than $110 million during the 2026 legislative session for housing assistance and homelessness prevention, the latest of several sessions that invested significant state funds in tackling a statewide affordable housing shortage. According to recent estimates, the state lacks more than 32,000 affordable housing units, and the state could lack as many as 90,000 units across the income spectrum.