FHFA Authorizes Fannie Mae and Freddie Mac to Fund the National Housing Trust Fund
News: on 12/11/14 , Mel Watt, director of the Federal Housing Finance Agency (FHFA) announced that he would direct Fannie Mae and Freddie Mac to begin setting aside and allocating funds to the National Housing Trust Fund (NHTF). Click HERE for a link for the letters sent to Fannie Mae and Freddie Mac.
Context: The decision to fund the NHTF is a great success for the affordable housing world and comes at the end of a long campaign to convince the FHFA to begin funding the program. Pursuant to the Economic Recovery Act of 2008, Fannie Mae and Freddie Mac were required to pay 4.2 basis points (.042%) of their total annual new business to the NHTF and the Capital Magnet Fund (CMF). However, because of the disastrous effect the economic downturn of the same year on Fannie and Freddie, the two companies were placed in conservatorship – a designation which FHFA asserted suspended their obligation to pay into the funds. However despite the fact that in 2012, Fannie and Freddie returned to fiscal solvency and became profitable again, the FHFA left the suspension in place.
Effect on Practitioners: the funding of the NHTF is a welcome addition to the affordable housing world in an environment of dwindling federal allocations to the work through HOME and CDBG. However, since funding begins this month, the funds will not be available till sometime in 2016. HUD will administer the program, but the program rules have not been finalized. What we do know is this: 75% of funds allocated to each state from the NHTF will need to go to programs addressing needs of Extremely Low Income Families, 90% of all funds will be used for rental housing, and 10% of all funds will be used for homeownership. According to an estimate from Enterprise Community Partners, $325 M should now go to the NHTF each year. For a full analysis of what is known so far about the NHTF, see the following article from Enterprise Community Partners (HERE).