Representatives John Delaney (D-MD), John Carney (D-DE), and Jim Himes (D-CT) introduced H.R. 5055, the Partnership to Strengthen Homeownership Act, on July 10. The bill is the third major housing finance reform proposal by Members of Congress this year. Like the Johnson-Crapo bill (see Memo, 5/16) and House Committee on Financial Services Ranking Member Maxine Waters’ draft Housing Opportunities Move the Economy (HOME) Forward Act (see Memo, 3/28), H.R. 5055 provides for substantial funding for the NHTF.
Just as other proposals being considered in the House and Senate, the bill would wind down the government sponsored enterprises Fannie Mae and Freddie Mac. The bill would create a mortgage insurance program run through the Government National Mortgage Association (Ginnie Mae), a government-owned corporation housed at HUD. The bill would provide a full government guarantee on qualifying mortgage securities backed by mortgages that meet certain eligibility criteria. As proposed, private capital would have a minimum 5% first-loss risk position. The remaining risk would be split between Ginnie Mae and private reinsurers.
Under the bill, in return for insuring securities, Ginnie Mae would charge a fee of 10 basis points on the total principal balance of insured mortgages. The bill would apply 75% of this fee revenue to the National Housing Trust Fund (NHTF), 15% to the Capital Magnet Fund, and 10% to a new Market Access Fund. This is identical to what the Johnson-Crapo and Waters bills do for the NHTF. However, unlike other the other bills, H.R. 5055 adds FHA mortgages in the determining the base upon which the 10 basis point fee is assessed. Thus, the overall fund would be valued at $6 billion a year, $1 billion more than the amount provided in the other bills. The amount going to the NHTF would be $4.5 billion.
NLIHC and the NHTF campaign are pleased with the strong support for the NHTF in H.R. 5055, as well as in the Johnson-Crapo and Waters measures. NLIHC President and CEO Sheila Crowley said in a letter to the sponsors of H.R. 5055, “I want to thank you for creating a robust dedicated source of revenue for the National Housing Trust Fund (NHTF) in the Partnership to Strengthen Home Ownership Act. We are grateful for your strong support of the NHTF and your prioritization of the housing needs of very poor people.”
H.R. 5055 would also add oversight provisions if contributions to the NHTF must be temporarily suspended. Under the current statute that governs the NHTF, the Federal Housing Finance Agency (FHFA) can “temporarily” suspend contributions to the NHTF if the contributions would lead to financial instability of Fannie Mae and Freddie Mac, but there is no requirement that suspension be reconsidered at any point. This has resulted in the nearly six year suspension of their obligation to fund the NHTF.
H.R. 5055 has more stringent suspension language, specifying that contributions can be suspended for one year upon the submission of a written determination from the Ginnie Mae Director to the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs. A suspension of funds could be extended for additional one-year periods, provided that for each requested extension, the Ginnie Mae Director provides information to the House and Senate demonstrating that suspension is still necessary.
The bill, like the Johnson-Crapo bill, would create a tribal set-aside within the NHTF of the greater of $20 million or 2% of the total amount provided to the NHTF. It would also increase the NHTF small state minimum to the greater of $10 million or 1% of the amount of NHTF provided to states.
A fourth housing finance reform bill, the Protecting American Taxpayers and Homeowners (PATH) Act, introduced by House Committee on Financial Services Chair Jeb Hensarling (D-TX) in 2013, would largely privatize the housing finance system and abolish the NHTF. While the measure has advanced through the Financial Services Committee last year, it is not expected to be considered by the full House of Representatives before the end of the 113th Congress.
H.R. 5055 has nine original cosponsors, all Democrats. They are Representatives Bill Foster (IL), Danny Heck (WA), Gregory Meeks (NY), Patrick Murphy (FL), William Owens (NY), Jared Polis (CO), Mike Quigley (IL), David Scott (GA), Kristen Sinema (AZ) and Peter Welch (VT). The bill has been referred to the House Committee on Financial Services.