Why is the Housing Trust Fund Important for NAMI?
The Housing Trust Fund’s most important features are:
- It is a permanent program with a dedicated source of funding not subject to the annual congressional appropriations process.
- At least 90% of the funds must be used for the production, preservation, rehabilitation, or operation of rental housing.
- Up to 10% can be used for the following homeownership activities for first-time homebuyers: production, preservation, and rehabilitation; down payment assistance, closing cost assistance, and assistance for interest rate buy-downs.
- Most importantly, at least 75% of the funds for rental housing must benefit extremely low income households and all funds must benefit very low income households.
- Investment to achieve development of 1.5 million new units of rental housing affordable to very low-income and extremely low-income households.
The Housing Trust Fund is the first new federal housing production program since the HOME program was created in 1990 and the first new production program specifically targeted to extremely low income households since the Section 8 program was created in 1974.
Funds for the Housing Trust Fund will come from annual contributions made by Fannie Mae and Freddie Mac. The amount will be based on a percentage of each company’s annual new business. Using the formula in the bill, the amount in 2007 would have been $557 million. Because their new business is increasing, the amount in 2008 is expected to be higher. However, 25% of the funds each year must first go to a reserve fund at the Treasury to offset scoring problems.
The remaining 75% of the funds will be divided between the Housing Trust Fund, which gets 65%, and a new Capital Magnet Fund that gets 35%. For the first three years, a percentage of the funds (100% in FY 2009, 50% in FY 2010, and 25% in FY 2011) will be diverted to a reserve fund to cover losses that the FHA might incur refinancing troubled mortgages through the new HOPE for Homeowners program – a major part of HR 3221 designed to prevent mortgage foreclosures. Based on the projected amount the formula will produce in calendar year 2008, approximately $300 million would have been available for the housing trust fund this year had it been in place with no diversions for the HOPE for Homeowners reserve fund. Funds not needed to cover FHA losses eventually will revert to the Housing Trust Fund and the Capital Magnet Fund.
Given the recent instability of Fannie Mae and Freddie Mac, concerns have been raised about whether any funds will be available for new programs. The new regulator has the authority to suspend contributions under certain circumstances related the fiscal distress of the GSEs. However, no money will be available for the Housing Trust Fund until FY 2010, by which time Freddie Mac’s and Fannie Mae’s fiscal conditions are expected to be much improved.
NAMI is extremely grateful for the leadership of the National Low-Income Housing Coalition and the National Housing Trust Fund Campaign in achieving this important victory. NAMI also salutes the extraordinary efforts of key leaders in Congress including House Financial Services Committee Chairman Barney Frank (D-MA), Senate Banking Committee Chairman Christopher Dodd (D-CT), Representative Maxine Waters (D-CA) and Senator Jack Reed (D-RI) to ensure that the Trust Fund stayed in the larger housing reform package.
More details on the Housing Trust Fund and the Capital Magnet Fund in HR 3221 are available here.