Proposed Senate Housing Bill Could Steal From the Poor

Responding to pressure from Ranking Member Senator Richard Shelby (R-AL), the Senate Banking, Housing, and Urban Affairs Committee “appears to be on the verge of diverting funds designated for a housing trust fund for housing for the poorest Americans to pay for Committee Chairman Christopher Dodd’s (D-CT) new program to refinance homeowners facing foreclosure,” according to a press release by the National Low Income Housing Coalition on May 16, 2008.

Chairman Dodd’s bill “The Federal Housing Finance Regulatory Reform Act of 2008,” proposes to allow the Federal Housing Administration to insure refinanced mortgages of homeowners who face foreclosure.

NLIHC reported that according to the Congressional Budget Office estimates, Dodd’s new program “creates a potential liability for the federal government of $1.7 billion.”

The National Housing Trust Fund Campaign was noted as urging Dodd to “identify other resources to pay for the new FHA program besides the only ones in this broad housing package that are dedicated to serving the poorest families in our country.”

Chairman Dodd’s bill also creates a housing trust fund with resources from Fannie Mae and Freddie Mac to build or preserve rental housing for extremely low and very low income people, according to NLIHC.

But, Sen. Shelby was reported to want those funds to be used to pay for the new FHA program instead, and he would only agree to the new FHA program “if it is paid for by non-taxpayer funds.”

Today, 71% of extremely low income renter households spend more than half of their income on housing, leaving them at risk of homelessness.

A provision in the Federal Housing Finance Regulatory Reform Act, which was authored by Senator Jack Reed (D-RI), would establish a housing trust with funds generated by Fannie Mae and Freddie Mac. Funds are estimated to be about $500,000 a year. Trust fund dollars would go to the states to distribute among housing providers to build and operate rental housing that is affordable to families in the low wage work force and to seniors and disabled people on fixed incomes.

Before the Banking Committee’s meeting on the Federal Housing Finance Regulatory Reform Act of 2008 on Tuesday, May 20, the National Housing Trust Fund Campaign called on the members “to reject” Sen. Shelby’s proposal and preserve the housing trust fund “to help the people with the most serious housing problems, including those who have no home at all.”