This morning, the Federal Housing Finance Agency (FHFA) announced it is directing Government-Sponsored Enterprises Fannie Mae and Freddie Mac (the GSEs) to begin setting aside and allocating funds to the Housing Trust Fund and the Capital Magnet Fund (the Funds). Although the Housing and Economic Recovery Act of 2008 (HERA) instructed the GSEs to contribute annually to the Funds, then–FHFA Acting Director Ed DeMarco in 2008 suspended such contributions before the GSEs made any.
NCSHA is a long-time supporter of the Housing Trust Fund and a dedicated funding source for it. States are statutorily designated as the Housing Trust Fund’s administrators. Many HFAs have already been designated by their states as the administrating entity.
Below is a brief description of the terms under which both Funds will receive the GSEs’ contributions and a set of questions and answers about the Housing Trust Fund.
In letters FHFA Director Mel Watt sent the GSEs this morning informing them that he is terminating the suspension, he directs them to begin making contributions under the following terms:
- Starting with the GSEs’ fiscal year 2015, which begins on January 1, 2015, the GSEs will begin setting aside an amount equal to 4.2 basis points of each dollar of unpaid balance of total new business purchases.
- Within 60 days after the end of the fiscal year, in January or February of 2016, the GSEs will transfer the funds, unless the GSEs drew funds from Treasury during the fiscal year or the transfer would cause them to require a draw of funds from Treasury.
- Of the funds being transferred from the GSEs, 65 percent will be allocated to HUD to fund the Housing Trust Fund and 35 percent will be transferred to the Capital Magnet Fund operated by Treasury.
What is the Housing Trust Fund?
The Housing Trust Fund is a formula block grant to states to use to increase and preserve affordable rental and homeownership housing. Its basic requirements are below.
Eligible grantees: States can designate a state housing finance agency, housing and community development entity, tribally designated housing entity, or any other qualified instrumentality of the state to receive the grant funds.
Grants: HUD will distribute by formula annual grants, with a minimum state allocation of $3 million, to each state’s designated entity. Each state’s designated entity must use at least 80 percent of the funding for rental housing, up to 10 percent for homeownership, and up to 10 percent for administrative and planning costs. The state or state-designated entity receiving grant funds must establish an allocation plan.
Beneficiaries: All assistance must be used to benefit very low- and extremely low-income families and at least 75 percent of assistance used for rental activity must be used to benefit extremely low-income families (those with incomes of no more than 30 percent of area median income (AMI) or below the poverty line, whichever is greater).
Commitment: State grantees must use or commit all funds within two years of when the funds become available.
How much money will be allocated to the Housing Trust Fund in its first year?
The allocation will be based on future business, but estimates range from $300 million to $500 million.
When will HUD publish regulations for the program?
HUD published a Proposed Rule
on October 29, 2010 and has sent the Final Rule to the Office of Management and Budget (OMB) for final clearance. In a statement
issued today, HUD Secretary Castro said, “HUD will soon issue regulations to implement the Housing Trust Fund.” NCSHA’s comments on the Proposed Rule are available here.
How do HFAs or other state-designated entities formally notify HUD that they will be their state’s administrator of the Housing Trust Fund? How do program administrators apply for their Trust Fund allocations?
We expect HUD to develop a formal process for accepting and recognizing state designations. We also expect HUD to inform states sometime in 2015 of how they can apply for their Trust Fund allocations.