Providing For Consideration Of H.R. 1427, Federal Housing Finance Reform Act Of 2007
Floor Speech
PROVIDING FOR CONSIDERATION OF H.R. 1427, FEDERAL HOUSING FINANCE REFORM ACT OF 2007 -- (House of Representatives - May 17, 2007)
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Mr. WELCH of Vermont. Mr. Speaker, as the Clerk just described, H. Res. 404 provides for consideration of H.R. 1427, the Federal Housing Finance Reform Act of 2007, under an open rule with a preprinting requirement. As of the date required for filing, 36 proposed amendments have been printed and met the preprinting requirement.
Mr. Speaker, affordable housing is absolutely critical as an issue to many Americans and certainly to folks in my State of Vermont, as well as yours. Along with food, health care and energy costs, affordable housing can make all the difference in economic survival, and we must begin to take seriously the challenge of affordable housing for renters and perspective homeowners.
In Vermont, just to give an example, affordable rental units, we have a shortage of about 20,891 rental units, short of what we need for working families in Vermont. They need in Vermont an annual income of $29,000 to afford a statewide average two-bedroom apartment.
The challenge of home ownership, in addition to renting, is daunting. While many low- and moderate-income households aspire to own their own home, limited supply, rising costs and other significant barriers can make that dream out of reach. Beginning in 2005, the new construction of 12,300 owner-occupied homes in Vermont was needed to meet the demand expected in 2010, not something that most Vermonters think will be possible.
The average purchase price for an average single-family home in Vermont in 2000 was $144,000, a lot less than it might be in the City of Washington, but beyond the reach of many Vermonters. But 5 years later, in 2005, the average price had increased a staggering 60 percent to $232,000, and very few families have seen their paychecks rise 60 percent in the past 5 years.
More than 1 million low-income households across New England, including the elderly, disabled and families, live in federally assisted housing. Most of these households have annual incomes of less than $8,000, well below the poverty line. They are at serious risk of homelessness. Even larger numbers of households are struggling to survive in the private housing market and are paying more than 50 percent of their income for rent.
In 1995, the housing community started facing dramatic changes in Federal housing policy, including funding cutbacks, program reforms and the devolution of responsibilities to State agencies who lack the funds to meet the need. Budget cuts aimed primarily at low income people presented an enormous challenge for communities across the country. Vermont and the whole of New England region, due to its high housing cost and large stock of subsidized housing, was one of the most heavily impacted regions in the country, but by no means unique. In the past few years, we have witnessed even more dramatic cuts to the important Federal housing programs, such as section 8, again imposing enormous burdens on our local communities.
The crisis of affordability is not just a well-crafted political phrase. It is a fundamental fact in Vermont and around the country, and it is a problem we must begin to address, as this bill, H.R. 1427, does.
What H.R. 1427 does is ensure that Fannie Mae and Freddie Mac operate in a safe and sound financial manner and they fulfill the responsibilities assigned under their charters given to them by Congress. These government-sponsored enterprises, or GSEs as they are called, support the mortgage market, and this bill establishes strong independent regulation and enhances GSE responsibilities under their mission.
The bill also creates the first new funding source for affordable housing since the HOME program was created in the early 1990s, and it does it without asking the taxpayers to pick up the tab. The $500 million affordable housing fund, which housing advocates in Vermont and around the country are very excited about, will be used for the badly needed construction and preservation of affordable housing.
Freddie Mac and Fannie Mae and several of the Federal Home Loan Banks have experienced considerable accounting, financial reporting and managerial problems in recent years. Unacceptable. Significant operational safety and soundness issues have arisen since 2001 that highlight the need to fortify the supervisory structure for all the regulated GSEs. This bill will do that.
The Federal National Mortgage Association, or Fannie Mae, and the Federal Home Loan Corporation, Freddie Mac, were chartered, as you know, by Congress in 1934 and 1970, respectively, in order to create a secondary market for mortgages and increase liquidity.
Through their charters, GSEs are granted special privileges not available to other private sector firms. For example, the Secretary of the Treasury is authorized to purchase up to $2.25 billion of the enterprises' obligations. Additionally, GSEs are exempt from State regulation, State income tax and SEC registration, substantial benefits conferred to meet a public need of providing affordable housing.
In January 2003, Freddie Mac announced that it needed to revise its financial statements, resulting in a special review by the Office of Federal Housing Enterprise Oversight, known as OFHEO.
In November of the same year, following the discovery of accounting irregularities and a reorganization of its management, Freddie Mac announced that it had overstated its earnings by $1 billion in 2001. An investigation into that is ongoing. The company said that the error, restating its earnings by that $1 billion, stemmed from failure to properly account for derivatives activity.
In December 2003, OFHEO reported that Freddie Mac disregarded accounting rules, internal controls and disclosure standards, again all completely unacceptable. Furthermore, the report found that the company had misstated its earnings overall by $5 billion between 2001 and 2003, and that the Board of Directors had failed to exercise its oversight responsibility. This has got to be corrected.
This bipartisan bill takes an important first step to provide effective oversight of GSEs in response to the lack of affordable housing that plagues so many of our communities.
Specifically, H.R. 1427 does the following:
Federal Housing Finance Agency: It establishes this as an independent regulator that oversees the safe and sound operation and mission function of the housing GSEs, Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks.
Director and Deputy Director: The FHFA will be led by a Director appointed by the President and confirmed by the Senate for a 5-year term.
A Federal Housing Enterprise Board is established.
Affordable housing goals: GSEs will be required to meet goals established by the FHFA for single and multi-family home purchasers in low income or very low income areas. The goals would be based on data using 3-year averages to determine the market and they would be set annually, but could be set for a multi-year period, allowing flexibility. It requires GSEs to serve underserved markets such as manufactured housing and affordable housing preservation in rural areas.
It also establishes an Affordable Housing Fund. The bill creates this with funds sent directly to the States to be administered as the States see fit. So we have a local control element here, enhancing the prospects that the money will be used for its intended purpose. The fund is intended to be a down payment toward the eventual creation of a much larger National Housing Trust. In fact, the bill provides that funds allocated for the Affordable Housing Fund may be transferred at a later date to the National Affordable Housing Trust Fund that hopefully we will enact that into law.
The bill also makes sure we take care of the victims of Hurricanes Katrina and Rita. The individuals living in the devastated gulf coast need the money immediately. Seventy-five percent of the Affordable Housing Fund available in the first year will go to Louisiana and 25 percent will go to Mississippi for affordable housing needs arising out of the hurricanes.
Also the bill is deficit neutral and directs that all of the spending is fully offset. Seventy-five percent of the contributions made by the GSEs would be used for the Affordable Housing fund. Twenty-five percent would be allocated to the Federal Government to keep the bill deficit neutral.
All of us applaud the work of Chairman Frank for recommending an open rule to this bill and for the content of this bill, and providing the first new infusion of funds into an ever rising crisis about affordable housing.
Chairman Frank came before the Rules Committee and testified we should allow consideration of all amendments, and we have done that, with the limitation of a preprinting requirement so as to allow us to manage and the Members to know what it is they will be debating on the floor. The rule was agreed to with the chairman, and I am pleased to bring forth such an open rule.
This is a bipartisan measure. It is supported by a diverse group of financial institutions, lenders, housing industry participants, housing groups and other financial service providers. The administration also supports the bill.
I urge all Members to support this open rule that allows the House to consider H.R. 1427.
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Mr. WELCH of Vermont. Before yielding to my friend from Massachusetts, I just want to emphasize that every single Member of this House did have an opportunity to preprint an amendment, as was done by my friend from Texas.
In a recent rule, we had a specific deadline by which that had to be filed. There were complaints from our friends on the other side of the aisle about a specific deadline. In this case, we extended it so that depending on what the floor schedule was, there would be the maximum time available for folks to put their amendments in printed form, and now there are complaints about that process as well.
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Mr. WELCH of Vermont. Mr. Speaker, I yield myself such time as I may consume.
H.R. 1427, the Federal Housing Finance Reform Act of 2007 ensures that Fannie Mae and Freddie Mac, the GSEs that support the mortgage markets, operate in a safe and sound manner and fulfill the missions assigned to them under their charters.
The bill does this through the establishment of a strong, independent regulator and through the enhancements to the GSEs mission responsibilities. The bill also creates the first new funding source for affordable housing. Since the HOME program was created in the early 1990s, it's been almost 20 years since we have put any infusion of money from a new source into a growing crisis in housing. The $500 million Affordable Housing Fund, which housing advocates in Vermont, in your State and States all across this country are very excited about, will be used by them for badly needed construction and the preservation of affordable housing.
Very similar legislation, as has been discussed between my colleagues from Texas and from Massachusetts, passed this House on a strong 331-90 vote last Congress, and this bill, H.R. 1427, was approved in the Financial Services Committee by a bipartisan vote of 45-19.
I urge a ``yes'' vote on the rule and on the previous question.
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