House Republicans Urge FHFA Not To Direct GSEs To Start Contributing To Affordable Housing Funds Established By HERA
On April 2, House Financial Services Committee Chairman Jeb Hensarling (R-TX), joined by Congressmen Scott Garrett (R-NJ) and Ed Royce (R-CA), urged FHFA Director Mel Watt to continue the FHFA’s five-year-old policy of suspending contributions to the Affordable Housing Trust Fund and the Capital Magnet Fund. These two funds were established in the Housing and Economic Recovery Act (HERA) to direct a percentage of GSE profits into affordable housing using a mechanism that would be off-budget and thus not subject to the Congressional appropriations process. In January, more than 30 Democratic Senators pressed Mr. Watt to change course and lift the suspension. Given that the federal government owns $189 billion in outstanding senior preferred shares, the Republican House members believe that lifting the suspension would divert money from Fannie Mae and Freddie Mac that could be used to compensate taxpayers. They added that funding the affordable housing programs would violate the “letter and spirit of the Housing and Economic Recovery Act,” and would be premature given ongoing congressional deliberations over broader housing finance reform.