Iowa, Maine, New Hampshire, Rhode Island, and Washington will receive a combined $133 million under the low-income housing tax credit (LIHTC) exchange program.

They are the second group of states to receive the funds, which stem from the American Recovery and Reinvestment Act (ARRA).

The funds are aimed at jump-starting stalled LIHTC developments. Iowa will receive $72 million; Maine, $4 million; New Hampshire, $10 million; Rhode Island, $36 million; and Washington, $11 million.

These states have chosen to exchange a portion of their unused LIHTCs for cash assistance, which will help developers get their affordable housing projects off the ground.

The economic downturn has stalled many affordable housing projects during the past year, as financing, including LIHTC equity, has dried up. Prominent tax credit investors Fannie Mae and Freddie Mac have stepped out of the market, and other corporations have reduced their appetite for credits. Without profits, companies cannot use the credits.

The Treasury Department anticipates making more funding awards in the coming weeks.

Meanwhile, Sen. Barney Frank (D-Mass.) is calling on Treasury officials to modify its guidance on the exchange program after some state leaders have raised concerns that the rules are hurting the program’s effectiveness.

In a June 1 letter, Frank said the Dec. 31, 2010, deadline to disburse the funds should be modified so a percentage of funds can be disbursed later. “Disbursements should be made in stages as a property is built and leased, so that funds can be held back in the case of a problem,” he said. “A 100 percent disbursement deadline by the end of next year has the effect of unreasonably requiring by that date either the full completion of the project or the premature release of all funds prior to project completion.”

Frank also urged the Treasury to allow states to use the funds to make loans and not just grants to developers. A loan option would provide greater flexibility, he said.

The third modification sought involves the recapture of credits. Frank said the Treasury is requiring a first lien to secure such recapture, which is potentially an issue for permanent lenders. As a result, he suggested finding more flexible provisions to address recapture.