House Financial Services Committee Chair Jeb Hensarling (R-TX) and Representative John Delaney (D-MD) released on September 6, a discussion draft of the latest attempt to reform the housing finance system. The draft bill would wind down secondary mortgage market giants, Fannie Mae and Freddie Mac, over a five-year period and create a mortgage insurance program run through the Government National Mortgage Association (Ginnie Mae). Ginnie Mae would become a stand-alone agency, no longer part of HUD. In return for insuring securities with an explicit government guarantee, Ginnie Mae would charge an affordability fee. Although the funds generated by this fee could contribute to an overall increase in funding dedicated to affordable housing, NLIHC is concerned that the bill would divert funding away from the national Housing Trust Fund (HTF), which is currently funded through a small assessment on Fannie Mae’s and Freddie Mac’s annual book of business.
Previous efforts to expand the HTF included the bipartisan 2014 Johnson-Crapo housing finance reforms, which included a provision that would have increased funding for the HTF to an estimated $3.5 billion annually. This funding increase would have made a significant contribution to ending homelessness and housing poverty without competing with other important HUD programs for appropriated funds. The level of funding provided by Johnson-Crapo should be the starting point for any new housing finance reform legislation taken up by Congress.
The sponsors of the current Hensarling-Delaney draft bill declare that they “are committed to providing sustainable, dedicated, and transparent funding to assist in addressing underserved individuals and markets.” The sponsors also “believe that government resources, combined with other sources of public and private funding and the work of market participants, can be leveraged to provide substantial funding in support of existing programs that contribute to the development of the supply of affordable housing options for low-income individuals and communities, such as the Housing Trust Fund and the Capital Magnet Fund. Combined with other sources of government funding, including current U.S. Department of Housing and Urban Development programs such as the Housing Choice Voucher program, these programs can help provide holistic affordable housing solutions.”
The sponsors request feedback on “how to most effectively target the assistance in order to directly help individuals who are most in need,” noting that “according to one analysis, ‘approximately 23% of those receiving a subsidy under the current system are not LMI (low- or moderate-income) households.’” However, the discussion draft’s affordability principles fail to acknowledge that the HTF is the most highly targeted federal rental housing capital and homeownership program. By law, at least 90% of HTF dollars must be used to support rental housing, and 75% of rental housing must serve extremely low income (ELI) households earning no more than 30% of the Area Median Income (AMI) or the federal poverty limit. The balance of either rental housing or homeowner housing may benefit households who have income no greater than 50% of AMI. In comparison, most other federal housing programs can serve households up to 80% of AMI.
Any bipartisan attempt at housing finance reform legislation should not only protect, but also significantly expand the HTF, particularly given its proven track record of effectively targeting assistance to individuals with the greatest needs.
The overview and summary of the discussion draft is at: https://bit.ly/2Messuk
The section by section summary of the discussion draft is at: https://bit.ly/2x0nhIT
The full draft bill is at: https://bit.ly/2Nn2uJH
More about housing finance reform is at: https://bit.ly/2syHxjr
More about the national Housing Trust Fund is at: https://bit.ly/1OuBHSN