By Eugene T. Lowe
March 19, 2007

Congressman Barney Frank (MA), along with Representatives Richard Baker (LA), Mel Watt (NC), and Gary Miller (CA), introduced bipartisan legislation March 9 that would reform the government sponsored enterprises (GSEs) of Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Included in the legislation is an affordable housing fund, which the Conference of Mayors called for in its 10-Point Plan. The affordable housing fund could provide some $400 - $500 million annually for the construction, maintenance and preservation of affordable housing.

The bill, H.R. 1427, the “Federal Housing Finance Reform Act of 2007” will provide overhaul and regulatory oversight to the government sponsored enterprises. A strong, independent regulator will be created that is similar to current banking regulators. As for the affordable housing fund, the funds in the first year would be dedicated to the areas stricken by hurricane Katrina. Thereafter, the funds would go to the states based on a formula developed by HUD. Each state would allocate funds under its own Allocation Plan, but the plan is to include priority housing needs. The Allocation Plan is also to include criteria such as “greatest impact, geographic diversity, ability to obligate funds in a timely manner, and the extent to which rental housing projects are affordable, especially for extremely low income families.”

In a letter to Frank, chairman of the House Committee on Financial Services, and Representative Paul Kanjorski (PA), chairman of the House Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, the Conference of Mayors and several other national organizations opposed the administration of the affordable housing fund by state housing agencies. The letter stated further: “Instead such a fund should be administered by the GSEs themselves so that it can leverage the GSEs other affordable housing activities.” Those other housing activities include tax-exempt housing bonds and the low-income housing tax credit. The letter added: “GSE administration of the affordable housing fund should be modeled after the highly successful Federal Home Loan Bank (FHLB) Affordable Housing Fund. That fund is structured in such a way as to be insulated from political influence. By modeling after the FHLB program there would be consistency among all of the GSE funds.”

Hearings are now being held on H.R. 1427. Markup of the bill could come as soon as the end of the month.