On July 9, 2013, the National Low Income Housing Coalition filed a lawsuit against the Acting Director of the Federal Housing Finance Agency Edward DeMarco for failing to uphold Fannie Mae and Freddie Mac’s statutory obligations to make contributions to the National Housing Trust Fund. NLIHC is a plaintiff for the lawsuit, alongside the Right to the City Alliance, and several low income residents.
The Housing and Economic Recovery Act (HERA) of 2008, signed by President George W. Bush, established the National Housing Trust Fund to build, preserve, rehabilitate, and operate rental housing that is affordable to the lowest income Americans.
The law requires that Fannie Mae and Freddie Mac transfer a portion of 0.042% of their new business to the National Housing Trust Fund. This requirement was temporarily suspended by the Director of the Federal Housing Finance Agency (FHFA) when Fannie Mae and Freddie Mac were taken into conservatorship, as allowed under the statute.
The statute allows the contributions to be temporarily suspended if the allocations to the NHTF:
- Are contributing or would contribute to the financial instability of the enterprise;
- Are causing or would cause the enterprise to be classified as undercapitalized; or
- Are preventing or would prevent the enterprise from successfully completing a capital restoration plan under Section 1369C.
Current Profitable State of GSEs
The 2012 Securities and Exchange Commission’s filings show that new business activity for Fannie Mae and Freddie Mac in 2012 was approximately $1.4 trillion. Thus in 2012, approximately $382 million of that amount should have gone to the NHTF.
Since then, Freddie Mac has reported a net income of $4.6 billion for the first quarter of 2013 (January – March), marking the company’s sixth straight quarter of profits. Fannie Mae reported it had a pre-tax income of $8.1 billion in the first quarter of 2013, the largest quarterly result in the company’s history.
Consequently, the conditions for the suspension no longer apply and should end immediately.
On April 15, 2013, representing NLIHC and the Right to the City Alliance, Attorney Charles Elsesser, Jr. of Florida Legal Services sent a letter to FHFA Acting Director Edward DeMarco demanding that FHFA make contributions to the NHTF immediately, as required by HERA. The letter demands that all suspended payments since, at a minimum, the first quarter of 2012 should be applied to the NHTF. Mr. DeMarco failed to respond to the Demand Letter.
NLIHC and the Right to the City Alliance have moved forward with legal action. NLIHC filed a lawsuit against Mr. DeMarco, in his role as conservator of the GSEs, on July 9, 2013. NLIHC is a plaintiff, representing low income residents who are in need of the NHTF. The other plaintiffs on the lawsuit are the Right to the City Alliance, and individual low income residents Angela Samuels, Rossana Torres, and Danielle Stelluto. The lawsuit is being handled by Attorney Charles Elsesser, Jr.
It is NLIHC’s hope that Fannie Mae and Freddie Mac will soon meet their statutory obligation to make contributions to the NHTF.
10/16/13: FHFA Files Response to NLIHC Lawsuit
7/9/13: Press Release from NLIHC
National Low Income Housing Coalition Files Suit Against Federal Housing Finance Agency for Failing to Fund Affordable Housing
4/15/13: Demand Letter from NLIHC and the Right to the City Alliance (PDF)
Letter to Federal Housing Finance Agency Acting Director Edward DeMarco demanding that FHFA release funds from Fannie Mae and Freddie Mac to the National Housing Trust Fund, as required by statute
4/15/13: Press Release from NLIHC President Sheila Crowley about Demand Letter
- The Housing and Economic Recovery (HERA) Act of 2008
- HUD Housing and Economic Recovery Act of 2008 FAQ