The Obama administration is launching a new effort to prop up the housing market by restoring financing to state housing and finance agencies.

Such agencies, known as HSAs, help low- and moderate-income families purchase homes or attain affordable rental housing. They have come under strain amid the financial crisis as investors have shunned their debt, forcing the agencies to curtail their activities.

The administration on Monday announced that Treasury would begin purchasing securities from Fannie Mae (FNM) and Freddie Mac (FRE) backed by new housing bonds issued by the HSAs to fund their activities. In addition, Fannie and Freddie will launch temporary credit and liquidity facilities for the HSAs. The state agencies will pay a fee for access to both programs.

"This initiative is crucial to helping working families maintain access to affordable rental housing and homeownership in tough economic times," Treasury Secretary Timothy Geithner said in a press release, issued jointly by the Treasury, the Department of Housing and Urban Development and the regulator for Fannie and Freddie.

The new initiative comes "at little or no cost to the taxpayer", according to the release, because it relies on fees from the state housing authorities and is designed to be temporary. The two programs will be available for "only a short window" to help the HSAs through the rough period in the credit markets, the administration said.

The bond program will support several hundred thousand new mortgages to first-time home buyers next year and enable strapped borrowers the chance to refinance into more affordable mortgages, according to an administration fact sheet. It will also fuel the development of tens of thousands of new, affordable rental-housing units.

-By Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@dowjones.com