Editor’s Note:
Chicago Coalition for the Homeless has supported work by the National Low Income Housing Coalition, which for more than a decade advocated a dedicated source of federal funding for housing for extremely low-income households.
In 2008, legislation passed to create a National Affordable Housing Trust Fund, but it was never funded.
Six years later, Fannie Mae and Freddie Mac have been directed by Melvin Watt, director of the Federal Housing Finance Agency, to start paying into the housing trust fund. Over time, this will result in new funding in Illinois for affordable housing development.
By Clea Benson
Fannie Mae and Freddie Mac (FMCC) will start making payments that could total hundreds of millions of dollars annually into a fund for affordable housing.
Melvin L. Watt, who oversees the companies as director of the Federal Housing Finance Agency, instructed them today to start setting aside a portion of their revenue for the National Affordable Housing Trust Fund, the only source of U.S. housing money earmarked for the lowest-income families.
The fund has been empty since Congress created it in 2008 because Watt’s predecessors said the financial condition of Fannie Mae (FNMA) and Freddie Mac prevented them from making payments.
“Circumstances have changed” and the suspension of payments into the fund “is no longer justified,” Watt said in letters he sent to the two companies.
Fannie Mae and Freddie Mac, which have been under federal conservatorship since 2008, have returned to profitability after a $187.5 billion U.S. bailout. They’ve sent $225.5 billion back to the Treasury, which takes all of their profits.
The money for the affordable-housing fund will be set aside before the companies calculate their earnings. States will be able to tap the fund primarily to subsidize rental housing for families living in extreme poverty.
Fannie Mae and Freddie Mac buy more than half of the new mortgages in the U.S. and package them into securities.
Democratic lawmakers and housing advocates urged Watt, who served in Congress before taking over at FHFA in January, to allow the payments for low-income housing. Republican lawmakers sent him letters urging him to continue the ban.
Representative Maxine Waters of California, who served with Watt as the top Democrat on the House Financial Services Committee, lauded the decision announced today.
“By allocating a tiny percentage of Fannie Mae and Freddie Mac’s profits to these funds, we have the chance to improve the lives of millions of American children, families, people with disabilities and the elderly,” Waters said.
Jeb Hensarling, the Texas Republican who leads the House Financial Services panel, said he’d call Watt to testify before the committee in January, terming the decision a “transparent effort to evade scrutiny” because it came at the end of a congressional session.
“Watt’s decision to activate the Fannie and Freddie slush fund may be an early Christmas present for Acorn-like, liberal housing activists, but it’s a lump of coal in the stocking of every American taxpayer,” Hensarling said in a statement.
The National Low Income Housing Coalition last year unsuccessfully sued the FHFA in federal court, contending that the suspension of payments violated the law that created the trust fund. The statute requires Fannie Mae and Freddie Mac to set aside less than 1 percent of the value of new business, an amount that would have reached $382 million in 2012, according to the lawsuit. Fannie Mae and Freddie Mac reported a combined profit of $28 billion that year.
A federal judge threw out the case in August, ruling that the groups didn’t have standing to sue.