AUGUSTA -- Investment advisers are optimistic, but uncertain, about MaineHousing Executive Director Dale McCormick's announcement Thursday that MaineHousing will be offering bonds exclusively to individual Maine investors.

Joel Davis of Joel Davis & Associates, an investment firm in Augusta, said these MaineHousing bonds are exclusively for Maine people.

"They're tax-exempt with a high rating," Davis said Friday. "It's a great way for the state of Maine to support Maine housing. It helps our economy and the taxpayers who are first-time and moderate-income homebuyers. It's a phenomenal idea."

Robert Tonge of R.M. Tonge & Co. in Waterville, which deals with investments and securities, said selling bonds are a way for agencies to raise money to fund their projects.

Although Maine has an excellent credit rating, he said the success of MaineHousing bond sale will depend on whether Maine people are willing to buy these bonds.

A big factor, he said, is the interest rate, which MaineHousing Treasurer Tom Cary said will be set on Tuesday when the orders for bonds are confirmed.

He said the rate will be based on what other bonds are selling for in the current market.

The goal, he said, is to set a rate high enough to attract Maine buyers but no higher than it has to be so MaineHousing can pass along as low a mortgage rate as possible to first-time homebuyers.

"We're not going to know until that date if the public is going to be interested in buying," Tonge said. "A week ago a bond was issued, I can't remember which one, but it was withdrawn because of the market. It just depends on what the interest is going to be and if the public agrees that that's a decent interest rate. Currently, the public isn't interested in buying bonds of any kind. Treasury bonds are yielding such a low (interest) amount that (investors) are exiting from that."

Cary said the bonds would be sold in a range of maturities, from two-year to 15-year. The interest rate increases with the length of maturity.

He said the state housing authority, which helps low-income and first-time homebuyers, has always offered bonds to Maine investors exclusively at least a day, sometimes two, before they are sold to institutional investors on Wall Street.

He said the MaineHousing sells bonds every couple of months at $200 million a year to fund its programs.

Since the national market is in turmoil, he said MaineHousing officials are counting on Maine buyers to do a much higher percentage in sales than they normally would.

He said it is a "win-win situation" for Maine people, a good investment because the bonds are exempt form both state and federal income taxes.

"The bonds will be attractive investments for Maine people," Cary said. "Many people have pulled money out of the stock market and have money to invest. Maine people will be getting a good investment that will result in other Maine people buying homes. By keeping the credit flowing in the real estate market we're helping the overall real estate market in Maine."

He said potential investors were calling MaineHousing on Friday, but Cary said they need to go through a bank or broker. If they are not a member of MaineHousing's selling group of investors, they can call JP Morgan, the senior manager of the bond sale, he said.

A list of brokers and banks selling the bonds are listed at the MaineHousing's Web site at www.mainehousing.org

MaineHousing bonds are debts of the agency, not the state, and are repaid by the mortgages MaineHousing makes with the bond proceeds.

He said MaineHousing's single-family first-time homebuyer's program operates on $200 million a year and between $40 and $50 million a year is needed to make mortgage loans to multifamily housing projects.

"All of our mortgages are funded by bonds so the urgency of this deal is that we really want to keep our programs going," he added. "The national markets are very problematic right now and we're counting on Maine investors to buy a higher portion of these bonds than normal so we can keep the credit flowing in Maine."

McCormick announced that the bond sale had been finalized at the Kennebec Valley Chamber of Commerce Women's Network Luncheon on Thursday.

Major Wall Street firms usually sell MaineHousing's tax-exempt revenue bonds to large national institutional investors, she said, adding that it's "a great opportunity" for Maine investors.

She said MaineHousing's bonds are rated Aa1/AA+ because of the agency's documented track record and because it does not make sub-prime mortgages. It also has a low delinquency rate on its loans.

In this current credit calamity, McCormick said the interest that Maine people earn on MaineHousing bonds is exempt from both state and federal income taxes, and from the alternative minimum tax, an extra tax some people have to pay on top of the regular income tax.

McCormick said the uncertainty on Wall Street is one reason why MaineHousing wants to market its bonds to in-state residents first. She said some housing authorities have shut down their bond programs, but Maine Housing felt it was essential to the state's economy and the nation to continue with its program

"So many people are pulling out of the stock market, there is a tremendous demand for in-state investments right now," McCormick said. "Plus, this really is an investment in Maine and in our people."

"Revenue from the sale will go towards helping Maine families buy their first home," she said. "Ultimately, this sale will help Maine's real estate industry and the overall economy of the state."

Mechele Cooper -- 623-3811, Ext. 408

mcooper@centralmaine.com