A funding structure to support the long-awaited National Housing Trust Fund and Capital Magnet Fund is proposed in a bipartisan housing finance reform draft released Sunday.
An incentive fee structure would be established by the new Federal Mortgage Insurance Corp. (FMIC). The funds are not paid for with tax dollars but through a FMIC user fee (10 basis points) that is paid only by those institutions that choose to use the new system, according to the plan unveiled by Sen. Tim Johnson (D-S.D.), chairman of the Senate Banking Committee, and Sen. Mike Crapo (R-Idaho), ranking member.
It is estimated that as much as $5 billion annually would be raised. The draft bill calls for 75 percent to go to the National Housing Trust Fund and 15 percent to the Capital Magnet Fund. Both were created in 2008 and were to be funded by an assessment on Fannie Mae and Freddie Mac, which was suspended before it could be implemented. The remaining 10 percent would go to a new Market Access Fund provided for in the draft bill, says the National Low Income Housing Coalition (NLIHC).
The Market Access Fund would support innovation in responsible lending products, education, underwriting, and servicing that will help address the homeownership and rental housing needs of underserved communities.
The Johnson-Crapo proposal makes two changes to the housing trust fund, both of which are supported by the NLIHC. It creates a new tribal set-aside, directing 2 percent or at least $20 million to federally recognized tribes or a tribally designated housing entity to be used for eligible affordable housing activities. The bill also increases the small state minimum from $3 million to $5 million.
“Once funded to scale, the National Housing Trust Fund is the solution to ending homelessness in the United States and assuring housing stability for low wage earners and poor people who are elderly or who have a disability,” said Sheila Crowley, NLIHC president and CEO, in a statement. “The Johnson-Crapo bill offers real hope to some of our nation’s most vulnerable and underserved citizens. I urge the Senate to act swiftly to pass this landmark legislation.”
The draft builds on the framework developed by Sens. Mark Warner (D-Va.) and Bob Corker (R-Tenn.). It would eventually eliminate Fannie Mae and Freddie Mac and create the new FMIC to regulate the secondary-mortgage market, similar to the way the FDIC regulates banks.
Here is a summary of the housing finance reform draft.