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Patrick to put loan program under scrutiny

Federal funds aid 3 agencies

Each year Massachusetts doles out hundreds of millions of dollars in federal low-interest loans to quasi-public development and education financing agencies in a selection process that takes place largely out of public view.

Now the Patrick administration wants to open the process to public scrutiny and is holding what it says is the first public hearing on where the money goes and how it is spent.

"It's a huge economic engine that the state is investing in that hasn't gotten a lot of attention," Administration and Finance Secretary Leslie Kirwan said in a recent interview.

It's Kirwan's job to decide how to divvy up the federal loan dollars -- this year totaling $547 million.

The money goes to three quasi-public state agencies -- the Massachusetts Housing Finance Agency, the Massachusetts Development Finance Agency, and the Massachusetts Educational Financing Authority -- which then make the loans available to private developers and individuals.

Kirwan said the distribution of the funds has historically been done largely out of the public eye. She said the decision to hold a public hearing is in keeping with Governor Deval Patrick's pledge to encourage more participation by citizens in government.

She emphasized that there was no suggestion that funds were misused.

The low-interest loans are federal and pose no financial risk to the state, according to Jay Gonzalez, an undersecretary to Kirwan.

Aaron Gornstein, executive director of the Citizens' Housing and Planning Association, said he welcomes the public spotlight.

He said he and other affordable-housing activists want to see more federal loans go to pay for multifamily rental housing.

The three quasi-public agencies that receive a portion of the federal loan dollars have distinct goals.

The Massachusetts Development Finance Agency, known as MassDevelopment, helps finance redevelopment projects across the state. During the past three fiscal years, the agency has helped finance or manage 589 projects, including the former Fort Devens military base redevelopment.

The Massachusetts Housing Finance Agency, or MassHousing, lends money at rates below the conventional market to support affordable rental and homeownership opportunities for low- and moderate-income residents.

The Massachusetts Educational Financing Authority helps students and families apply for and choose college financing options including low-cost loans and college savings plans.

The hearing is scheduled for Thursday at the State House. Representatives from all three agencies, as well as activists and members of the public, are scheduled to testify.