GSE Reform: A New Affordable Housing Fund

Publication Date: November 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Social conditions

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Abstract:

One key feature of the House government-sponsored enterprise (GSE) reform bill (H.R. 1461) is the requirement that Fannie Mae and Freddie Mac give part of their profits to create new affordable housing funds. Based on the GSE's average profits from 2000 to 2003, the amount would be about $390 million annually during the first two years and $580 million in subsequent years. The requirement would expire after five years.

The fund would help lower-income homeowners and renters and give priority to the victims of natural disasters such as Hurricanes Katrina and Rita. Funds from Fannie Mae and Freddie Mac would go to affordable housing organizations, which would then work directly with the beneficiaries. Nonprofits would face controversial restrictions on election and political activities.

The bill also would modify existing GSE housing goals to concentrate on lower-income families. It would set the housing goal targets in the law, replacing the existing targets set by regulation. The bill does not specify the legal, tax, or accounting details of the new funds or their relationship with the GSEs. For a comparison of all aspects of the House and Senate bills, see CRS Report RL32795, Government-Sponsored Enterprises (GSEs): Regulatory Reform Legislation, by Mark Jickling.

This report will be updated as legislative events warrant.