Final answer:
The New York State Housing Finance Agency is responsible for raising tax-free bond funds and channeling them into mortgage loans for affordable housing.
Step-by-step explanation:
The agency in New York that specializes in raising money from tax-free bonds and then applying those funds to mortgage loans is known as the New York State Housing Finance Agency (HFA). This agency helps to finance affordable housing initiatives across the state of New York. The bonds issued by the HFA are attractive to investors because they are often exempt from federal, state, and local taxes, which provides a lower cost of capital to fund these mortgage loans.