S. 1217, “the Housing Finance Reform and Taxpayer Protection Act of 2013,” would wind down the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, and replace them with the Federal Mortgage Insurance Corporation (FMIC). The FMIC would offer an explicit government guarantee, purchase and securitize single and multifamily mortgage portfolios, and provide regulatory oversight of the Federal Home Loan Banks.
The bill would continue the obligation to support affordable housing as is now required of the GSEs, but would change it considerably. A fee of five to ten basis points would be assessed on all loans securitized by the FMIC to fund all affordable housing activities. The final amount of the basis point fee will be determined at a later time.
The bill continues to require funding for the Housing Trust Fund and the Capital Magnet Fund, as is in current law. The function of helping low and moderate income people gain access to credit in order to become homeowners, previously covered by “affordable housing goals” would now be addressed through a “market access fund.” This fund would cover a variety of activities to support “sustainable homeownership and affordable rental programs” and “credit enhancement and other forms of credit support” for households with incomes up to 120% of area median income.
Initial drafts of the bill provided for the Housing Trust Fund, Capital Magnet Fund, and Market Access Fund (MAF) separately, but the bill as introduced places the purposes of the Market Access Fund under the Housing Trust Fund. Of the revenue raised by securitization fee, 80% would go to the Housing Trust Fund and 20% to the Capital Magnet Fund.
The funding directed to the Housing Trust Fund would be divided into three distinct purposes: 35% of the funds would go to rental housing for extremely low income (30% AMI or less or ELI) and very low income (50% AMI or less or VLI) households, 5% of the funds would go to homeownership activities for ELI and VLI households, and the remaining 60% of the funds would be applied to activities that would be covered in the proposed MAF with the income targeting of up to 120% AMI.