Fannie / Freddie To Make Housing Fund Payments

Mix results seem to abound about the announced payments to be made by Fannie Mae and Freddie Mac to federally sponsored national housing trust funds for very low and low income housing.  FHFA Director Melvin Watt has lifted the suspension of payments by the GSEs that were requied under the Housing and Econimic Recovery Act of 2008 ("HERA").  In fact, the GSEs never made any payments to the housing funds as the GSEs went into conservatorship and HERA provides that the FHFA can suspend the required payments if the payments would contribute to the financial instability of the GSEs or would cause the GSEs to be undercapitalized.

The National Mortgage Professional reports that there are mixed reactions from politicians to the order by Watt to make the required payments.  HousingWire is reporting that Community Development Financial Institutions are excited that the required payments will be made.

The payments to be made by Fannie and Freddie are equal to 4.2 basis points of every dollar of the unpaid principal amount of their total new business purchases.  The payments are made to the National Housing Trust Fund administered under HUD, and to the Capital Magnet Fund, which is administered by the Community Development Financial Institutions Fund that was established in 1994. The National Housing Trust Fund disburses its funds to states and state-designated agencies for the production and preservation of affordable housing.  Eighty percent of its funds are to be used for rental housing.  The Capital Magnet Fund can provide grants for a wide variety of affordable housing and economic development projects, including the development, preservation, rehabilitation and purchase of housing for low income families. 

A rather comprehensive account of Fannie and Freddie and their trials and tribulations since the onset of the Great Recession can be found at this link.  Fannie and Freddie did not recover from the great Recession and begin turning a profit until 2012. 

We will need to wait to see what the impact of these payments on the housing market will be. The ultimate beneficiaries of these payments will be low income families and a large portion of these funds will apparently be for rental housing.