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The Tandem plan is a strategy used in the US to obtain funds for non-profit public housing. It involves issuing tandem loans through government-affiliated agencies, allowing for the purchase of outstanding mortgages at rates below market value. Builders and developers must meet criteria established by Ginnie Mae for participation. The plan is debated, with supporters arguing for government intervention and detractors arguing it can be manipulated.
A tandem plan is a type of strategy that makes it possible for building professionals and developers to obtain the necessary funds to create non-profit public housing. This type of arrangement is used within the United States and involves the issuance of what are known as tandem loans through agencies affiliated with the federal government. Essentially, the Tandem plan makes it possible for the National Government Mortgage Association, popularly known as Ginnie Mae, to buy outstanding mortgages at rates that are below current market value. Ginnie Mae can sell those mortgages through the Federal Home Mortgage Loan Corporation, or Freddie Mac, or through the Federal Mortgage Association, also known as Fannie Mae. The end result is increased ability to build public housing in areas where there is a housing shortage and make those units available to people who meet basic qualifying criteria.
For a tandem plan to work, the applicant must receive what is known as a tandem loan. Essentially, this is a loan that is extended to a property that already carries some form of debt obligation, and the balance of the two loans is consolidated. While a tandem loan can be used for various types of lending strategies outside the scope of a tandem plan, the goal is typically to help potential homeowners obtain financing that is affordable and within the limitations of their income and budget. , making it possible to get more people to become homeowners.
To participate in the Tandem plan, builders and developers must meet the criteria established by Ginnie Mae for participation. The development must be in an area approved by the agency and in compliance with all local building codes, as well as quality standards established by Ginnie Mae. In addition, the builder or developer must also meet the credit requirements established by the agency and agree to the payment terms as outlined by that agency. If all is in order, the loan can be purchased by Ginnie Mae, then restructured into a debt obligation that can then be sold to Freddie Mac or Fannie Mae.
Although the Tandem plan is associated with the creation of public housing in the United States, the approach bears some resemblance to other public housing strategies used in other nations. Typically, the structure of the plan will require the purchase of a loan by one government entity and the resale of that loan to another entity, making it possible for public housing to provide basic housing for more citizens. The practicality of the Tandem plan is a constant source of debate, with supporters arguing that government intervention is necessary to ensure that housing is available to low-income households, and detractors arguing that this approach can be manipulated in a way that benefit some but not necessarily all of the citizens the plan was intended to support.
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