What are the Housing Goals?
The Housing and Economic Recovery Act of 2008 contains goals for residential low income, very low income and housing for families residing in low income areas. These goals will be set by the Director of the Federal Housing Finance Agency within a “reasonable time table”.
The legislation describes the goals as a percentage of single family money market mortgages financed. Targets are determined by national housing needs, economic, housing demographics and conditions, and the peformance and efforts of the lender. Mortgage financing of one to four owner occupied units will count towards these goals as will multifamily housing financed by tax exempt or taxable bonds if they meet certain requirements.
Multi-family affordable housing units includes mortgages for very low family income housing and housing which is eligible for assistance from Section 42 of the Internal Revenue Service tax code. Additionally, smaller units and those units 5 to 50 units may be eligible for up to $5,000,000.
Owners of very low income owner occupied units cannot have income more than 50% of the median income level of the area. The same applies to rental units with adjustments for family size. However income must be at least 30% of the median level for the area. Extremly low income is considered not more than 30% of the median income level of the area.
According to the legislation, there is a duty to serve underserved markets which include; very low, low, and moderate income families. Fannie Mae and Freddie Mac are expected to purchase securitized mortages which may not carry the same rate of return as other mortgages.
In an effort to provide very low, low and moderate income housing, new products are to be developed for the secondary market for manufactured housing with flexible underwriting guidelines, as well as affordable site built housing. These guidelines will also apply to Section 8 housing, below market interest rate mortgage programs, housing for the elderly, the disabled, the homeless and rural rental housing.
Provision is made for monitoring, enforcement and compliance of these housing goals. The Director determines whether each enterprise (Fannie Mae, Freddie Mac, Federal Home Loan Banks and/or affiliates) have met the goals. If not met, the Director can issue a cease and desist order, issue civil monetary penalties, or require the enterprise to submit new housing goal plans.
For each dollar of unpaid principal balance of new total business, Fannie Mae and Freddie Mac must set aside 4.2 basis points. (A basis point is 1/100th of a one point.) Translated, this means that on a $100,000 unpaid balance, 4.2% must be set aside or $4.20. A total of 65% will go to the Secretary for HUD to fund the Housing Trust Fund and 35% will go to the Capital Maget Fund.
The purpose of the Housing Trust Fund is to increase the supply of rental housing for low, extremly low, and very low income families including homeless persons, according to the legislation. In 2010 and subsequent years, grants to state housing finance agencies, housing community developments, and tribally designated housing entities will be awarded on a needs based formula. A minimum of $3,000,000 will be awarded to each state.
Grants can be used for production, preservation and rehabilitation of housing with no less than 75% of the funds going to extremly low income families and 25% going to very low income famlieis. Down payment assistance, closing costs, and interest rate buydowns are permitted for extremely low and low income buyers.
The Capital Magnet Fund is designed to attract private capital for increased investement in affordable housing for extremely low, very low, and low income families. Funding may be given for community service facilities such as day care centers, workforce development centers and healthcare clinics to stablilize or revitalize low income areas or underserved rurual areas. Provisions are made for the Secretary of the Treasury to report to Congreess and the public.
Resources:
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h3221eas2.pdf
Section 8 United States Housing Act of 1937
Section 236 of National Housing Act
Section 221 (d)(4) National Housing Act
Section 202 of Housing Act of 1959
Cranston-Gonzalez National Affordable Housing Act
McKinney-Vento Homelss Assistance Act
Rural Rental Housing Program SEction 515 Housing Act of 1949
http://seattletimes.nwsource.com/html/opinion/2008082463_broder31.html
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