Finance

Republicans blast FHFA plan to restart contributions to housing trust fund

Congressional Republicans on Thursday blasted a plan by a top housing regulator to restart contributions to a housing trust fund.

Mel Watt, director of the Federal Housing Finance Agency (FHFA), sent letters to Fannie Mae and Freddie Mac asking the entities to begin setting aside and allocating funds to the Housing Trust Fund and the Capital Magnet Fund, reversing a six-year suspension of payments.

{mosads}House Financial Services Committee Chairman Jeb Hensarling (R-Texas) said Watt “is making a grave mistake that harms hardworking taxpayers and violates both the letter and spirit of the law.”

He accused Watt of timing the decision for the end of the 113th Congress “in a transparent effort to evade scrutiny and frustrate congressional oversight.”

He vowed to call Watt to testify in early January to discuss the issue.

“Diverting assets to housing trust funds instead of repaying taxpayers or stabilizing Fannie and Freddie’s finances only makes matters worse,” Hensarling said.

“Director Watt’s decision to activate the Fannie and Freddie slush fund may be an early Christmas present for Acorn-like, liberal housing activists, but it’s a lump of coal in the stocking of every American taxpayer.”

In his explanation, Watt said that while the profit levels of Fannie and Freddie have experienced since 2012 “are not expected to be sustainable” there are reasonable projections that the entitiies “will remain profitable for the foreseeable future.”

In November 2008, shortly after the Fannie and Freddie were taken under government control, the FHFA suspended payments to the permanent federal fund that focuses on providing support to states to build and boost the supply of affordable rental housing for extremely low- and very low-income families, including homeless families.

Rep. Randy Neugebauer (R-Texas), chairman of the House Financial Services Subcommittee on Housing and Insurance, said he was “outraged” at Watt’s decision and said the “timing could not be more suspect.”

“Recent history should serve as a reminder that failed government housing policy can have catastrophic consequences for hardworking American taxpayers and the overall health of our economy,” he said.

This is déjà vu all over again. Director Watt may have forgotten the path of destruction left by the GSEs, but the American people have not.”

Fannie and Freddie needed about $190 billion to stay afloat during the financial crisis. Congress has yet to agree on a plan that would bring them out of conservatorship and reduce the risk for taxpayers.

“Contrary to what Fannie and Freddie apologists claim, the GSEs have yet to repay any of the taxpayer-funded bailout funds they received, which makes today’s announcement by the FHFA outrageous. Money coming in from the GSEs should go to the taxpayers instead of a slush fund for ideological housing groups to play around with,” said Rep. Ed Royce (R-Calif.), a member of the Financial Services panel who has worked on the issue. 

Sen. Bob Corker (R-Tenn.), a member of the Senate Banking Committee, called the decision “beyond irresponsible to restart these affordable housing allocations without first dealing with the underlying problems at Fannie Mae and Freddie Mac.”

“These two entities would not be generating one penny of revenue without taxpayer backing, and until the American taxpayers are taken off the hook for a future bailout, FHFA should continue to suspend payments to these funds,” Corker said. 

But Democrats said it is time to take steps to help families in need. 

Rep. Maxine Waters (D-Calif.), ranking member of the House Financial Services Committee and co-author of legislation that created the fund, praised the announcement

“In the richest country in the world, it is unconscionable that there are 7.1 million American households for whom safe and decent housing is neither affordable nor available,” she said.  

By allocating a tiny percentage of Fannie Mae and Freddie Mac’s profits to these funds, we have the chance to improve the lives of millions of American children, families, people with disabilities and the elderly.”

Several Democractic senators — Jack Reed (R.I.), Barbara Boxer (Calif.), Elizabeth Warren (Mass.) and Bernie Sanders (I-Vt.) — called the  move “a smart step toward strengthening our economy and increasing the supply of affordable rental housing across the country.”

“It will allow more renters to find the homes they need at prices they can afford and will help with economic development initiatives in low income or rural areas,” Reed said.

Housing and Urban Development (HUD) Secretary Julián Castro hailed the decision and said it “will help people across the nation secure a decent place to call home.”

“This effort will assist individuals from all backgrounds — including low-income families and those experiencing homelessness — in building better lives.”

He said HUD will soon issue regulations to implement the trust fund.

This story was updated at 3:15 p.m.

Tags Barbara Boxer Bernie Sanders Bob Corker Ed Royce Elizabeth Warren Fannie Mae Federal Housing Finance Agency Freddie Mac Housing and Economic Recovery Act Jack Reed Jeb Hensarling Julian Castro Maxine Waters Mel Watt Randy Neugebauer

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