House Committee on Financial Services Ranking Member Maxine Waters (D-CA) released her draft housing finance reform legislation, the “Housing Opportunities Move the Economy (HOME) Forward Act of 2014,” on March 27. The bill provides for robust funding for the NHTF.
The HOME Forward Act would wind down Fannie Mae and Freddie Mac over a five year period and replace them with a newly created lender-owned cooperative, the Mortgage Securities Cooperative (MSC). The MSC would be the only entity that could issue government guaranteed securities and would be lender-capitalized, based on mortgage volume. The bill would also create a new regulator, the National Mortgage Finance Administration (NMFA).
Like the Johnson-Crapo discussion draft bill released on March 16 (see Memo, 3/14), the Waters bill would require a 10 basis point fee assessment on users of the new system, estimated to generate approximately $5 billion a year. The Waters bill would direct 75% of the amounts collected through this fee to the National Housing Trust Fund (NHTF), 15% to the Capital Magnet Fund, and 10% to a new Market Access Fund.
In a press release about the HOME Forward Act, NLIHC President and CEO Sheila Crowley said, “Representative Waters has been a stalwart champion of the National Housing Trust Fund for many years. She knows how crucial stable, secure housing is for children to succeed in school, for adults to succeed in the workplace, and for seniors and people with disabilities to live with dignity in their communities. We are very grateful that she has provided for decent homes for them in her legislation.”
The HOME Forward Act allows the temporary suspension of contributions to the three funds if the contribution requirement would lead to the instability of the MSC, but with stringent oversight. If the Administration wanted to suspend contributions, a written determination would have to be first submitted to the congressional committees with jurisdiction over the funds. The contributions could then be suspended for one year. To continue the suspension of funds, additional determinations would need to be submitted to the committees of jurisdiction every six months in a written agreement between the HUD and Treasury Secretaries.
The contributions to the NHTF authorized under Housing and Economic Recovery Act (HERA) of 2008 have been “temporarily” suspended since 2008. The suspension has not been lifted even though Fannie Mae and Freddie Mac are once again profitable. NLIHC and others think that HERA required contributions should be made retroactively starting from the first quarter of 2012. The Johnson-Crapo bill also allows for such a temporary suspension, but lacks the specificity such as provided in the Waters bill.
The HOME Forward Act also adds a new provision to the NHTF statute that would require that NHTF dollars to be distributed to rural areas in the same proportion as to urban areas.
Upon transition to the new system, the point at which Fannie Mae and Freddie Mac stop taking on new business, the bill would provide for the distribution of their net earnings while in conservatorship. The bill explicitly calls for “payment of any deferred contributions to the Housing Trust Fund and Capital Magnet Fund that have not been paid.”
The bill would repeal Fannie Mae’s and Freddie Mac’s affordable housing goals, but requires lenders to serve all credit worthy borrowers as a condition of participating in the new system.
Read a summary of the HOME Forward Act at: http://bit.ly/1mpk74J
Read a section-by-section of the HOME Forward Act at: http://bit.ly/1mpk1Ka
Read the HOME Forward Act text at: http://bit.ly/1hTVOrs
Read NLIHC’s Press Release at: http://nlihc.org/press/releases/4216