NEW YORK (Dow Jones--The National Governors Association Wednesday urged Treasury Secretary Timothy Geithner to provide federal aid to improve capital liquidity for state housing finance agencies.

As of December 2008, the HFAs reported about $7 billion in housing bonds ready for sale and about $9.7 billion that needed liquidity providers, the NGA said in a letter to Geithner.

The letter, which called for help from the Treasury and Federal Reserve, or from government-sponsored enterprises Fannie Mae (FNM) and Freddie Mac (FRE), or from the Federal Housing Finance Agency, was signed by four governors. They included the NGA chairman, Gov. Ed Rendell of Pennsylvania, and the group's commerce committee chairman, Gov. Jon Corzine of New Jersey.

State HFAs issue revenue bonds to finance multifamily housing for low- or moderate-income families and single-family housing for first-time home buyers, as well as housing for the aged and veterans.

"This stalled market has forced state HFAs to curtail lending just when citizens need them to be more active," the letter said. "Some HFAs have shut down their single-family programs altogether."

Passage of the Housing and Economic Recovery Act last year and recent passage of the economic-stimulus package provide new housing-bond and housing tax-credit tools. State HFAs may not be able to use these tools to their best advantage without stable sources for affordable capital, the letter continued.

It offered three ways to provide that goal.

The Treasury and Federal Reserve could establish a liquidity facility for variable-rate debt of HFAs experiencing difficulties with remarketing.

Fannie Mae and Freddie Mac, government-sponsored enterprises under federal conservatorship, could be directed to buy tax-exempt and taxable HFA bonds at favorable interest rates and provide liquidity to support HFA lending programs.

The Federal Housing Finance Agency, through Fannie Mae, Freddie Mac and the 12 Federal Home Loan banks, could support HFAs by providing liquidity facilities at reasonable terms.

By Stan Rosenberg, Dow Jones Newswires, 201.938.2143; stan.rosenberg@dowjones.com