Fannie Mae and Freddie Mac have made their first contributions to the National Housing Trust Fund (NHTF), which were originally intended to start when the NHTF was created in 2008 but suspended when the GSEs were taken into conservatorship by the Federal Housing Finance Agency (FHFA).
The GSEs will be contributing $186 million to the NHTF in order to provide more funding for construction and rehabilitation of affordable rental housing for low-income families. The fund was signed into law in 2008 as a provision of the Housing and Economic Recovery Act of 2008 by then-President George W. Bush. According to the NHTF’s website, the creation of the fund “is a major victory for low-income housing advocates and the lowest income people in our country with the most serious needs.”
FHFA Director Mel Watt announced in December 2014 that he was lifting the temporary suspension of the allocation of GSE funds to the NHTF.
"Affordable housing is about opportunity,” HUD Secretary Julián Castro said at the time Watt lifted the suspension. “That’s why today represents important progress for the American people. The Federal Housing Finance Agency's decision to release resources for the Housing Trust Fund 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. HUD will soon issue regulations to implement the Housing Trust Fund. We look forward to working with partners from throughout the nation to expand the circle of opportunity for current and future generations of Americans.”
Castro told a Senate Appropriations subcommittee that states will begin submitting requests to receive money recently contributed to the NHTF by Fannie Mae and Freddie Mac, and that the NHTF would likely begin distributing the money this summer.
Fannie Mae and Freddie Mac have been under conservatorship of FHFA since September 2008 “to preserve and conserve their assets and property and restore them to a sound financial condition so they can continue to fulfill their statutory mission of promoting liquidity and efficiency in the nation's housing finance markets," according to the FHFA. The two GSEs received a combined $187.5 billion in bailout money from the government in 2008, but have since returned to profitability.
Republican lawmakers attempted to stop the lifting of the suspension of the allocation of GSE funds to the Housing Trust Fund. In April 2014, Reps. Ed Royce (R-California) and Jeb Hensarling (R-Texas) wrote a letter to Watt urging the FHFA to continue suspension of the allocation of funds.
On Monday, Hensarling criticized the contribution of $186 million by Fannie Mae and Freddie Mac to the NHTF.
"In taking this action, Director Watt has made a grave mistake that harms hardworking taxpayers and violates both the letter and spirit of the law,” said Hensarling, who is the chairman of the House Financial Services Committee. “Fannie Mae and Freddie Mac were at the epicenter of the 2008 financial crisis that threw millions of Americans out of work and destroyed trillions of dollars of household wealth. The nearly $200 billion bailout of Fannie and Freddie is still the biggest, costliest taxpayer-funded bailout in history, and contrary to what some claim, they have yet to ‘repay’ taxpayers one thin dime. Diverting assets from taxpayers to housing trust funds re-invites the same politically directed lending abuses that have characterized the broken GSE model and sows the seeds for the next housing crisis.”
Royce, a senior member of the House Financial Services Committee, also spoke out against the GSEs' contribution to the NHTF on Monday. Royce introduced the Pay Back the Taxpayers Act of 2015 in January 2015, proposing that no funds from Fannie and Freddie can be used to fund the national Housing Trust Fund while the GSEs are in conservatorship or receivership.
"We must stop the egregious siphoning of money from the GSEs to this housing slush fund,” Royce said. "I look forward to working with Chairman Hensarling on advancing the Pay Back the Taxpayers Act, which preempts future payments of this kind and sends them where they belong: to the taxpayers. In the interim, lawmakers should conduct vigorous oversight as to where this money is going, who is using it, and what exactly it is being spent on."