With or Without A Housing Fund?
Wednesday, July 27, 2005
Eight years ago, Margaret Dabreau was a single parent earning $20,000 a year as a day-care worker. She signed up for a home buyer's class with the nonprofit ACORN Housing Corp., received down payment assistance to buy an $84,000 rowhouse in the District, and credits the organization for the fact that she is earning equity in the area's housing boom.
Owning a home "makes you feel like you're worth something," said Dabreau, who appreciated the assistance so much she vouched for ACORN Housing in a 1999 briefing for congressional staff.
Dabreau's stake in the home market may be a success when viewed as an economic issue, but it also helps explain the political struggle underway over a low-income housing fund proposed as part of the effort to overhaul regulation of mortgage giants Fannie Mae and Freddie Mac.
Though ACORN Housing helped process Dabreau's mortgage application and received the accolades, the money that helped buy her house came from the Federal Home Loan Bank of Atlanta -- part of a program under which the 12 Federal Home Loan Banks (FHLBs) funnel 10 percent of their annual profit into a low-income housing fund. While Democrats and advocates for low-income housing regard the program as a model for Fannie Mae and Freddie Mac, conservative lawmakers are fighting the idea, arguing that the funds from Fannie Mae and Freddie Mac would benefit groups they consider left-leaning, such as ACORN Housing.
"A lot of these funds are just going to end up in the hands of very politically active groups to come back and lobby us," said Rep. Jeb Hensarling (R-Tex.) in a congressional hearing.
"We are very conscientious about this," responded ACORN Housing's national director of housing counseling, Bruce Dorpalen, who noted that unlike its sister organization, the Association of Community Organizations for Reform Now, the housing program is prohibited from lobbying.
The proposed low-income housing fund has become a central stumbling block in the debate over legislation whose primary purpose is to establish stricter regulations for Fannie Mae and Freddie Mac following a series of accounting scandals.
A House committee has recommended that the companies put 5 percent of their profit into a low-income fund, but conservative lawmakers are trying to have the provision removed. In the Senate, meanwhile, Banking Committee Chairman Richard C. Shelby (R-Ala.) has excluded the fund from his version of the bill, but that could cost the Democratic support needed to assure passage. The Senate bill is to be debated tomorrow in Shelby's committee.
Executives at Fannie Mae and Freddie Mac have not taken a position on the issue.
Though both are for-profit, publicly traded companies, Fannie Mae and Freddie Mac also operate under a government charter to keep the housing markets supplied with cash by purchasing mortgages from banks and other retail lenders -- which can then use the proceeds of the sale to make more loans. By law, the companies are already required to "lead the market" by purchasing loans made to low-income families and other underserved groups. For the past eight years, Fannie Mae has met the affordable housing goals set for it by the Department of Housing and Urban Development, the company has said in a series of advertisements.
In addition, the companies fund affordable housing through their foundations, which recently have together given up to $80 million a year in grants. Fannie Mae also makes debt and equity investments in low- and moderate-income housing through its American Communities Fund.
Critics of the two companies contend that HUD sets the bar too low. A 2001 study by FM Policy Focus -- a group critical of Fannie Mae and Freddie Mac that consists of competitors including Wells Fargo & Co. and General Electric Capital Corp. -- found that the companies lagged behind private banks in financing loans to black and Hispanic home buyers.