Affordable Housing Finance

HOUSING POLICY

Washington Update

Obama Outlines Spending Plans

AFFORDABLE HOUSING FINANCE • April/May 2009

BY BARRY G. JACOBS

President Barack Obama holds a prime-time news conference March 24 to increase popular support for his $3.6 trillion budget and economic recovery plan. (Photo by Getty Images)

President Barack Obama has outlined a fiscal 2010 budget that provides more funding for federal housing programs, including $1 billion for the national Affordable Housing Trust Fund. Overall discretionary Department of Housing and Urban Development (HUD) funding would be up about $6 billion, to $47.5 billion.

The proposed appropriation for the trust fund would help fill the gap resulting from the suspension of assessments on Fannie Mae and Freddie Mac, which were supposed to be its primary funding source.

The budget outline also calls for increased funding for Sec. 8 tenant-based and project-based assistance, though it doesn’t specify amounts.

In addition, the administration plans to introduce legislative reforms to the voucher program to help fully utilize available funding and ease the administrative burdens on public housing authorities.

The administration will also request $4.5 billion to fully fund the Community Development Block Grant (CDBG) program in fiscal 2010, with legislation to revise the funding formula to better target assistance to distressed areas and promote sustainable and economically viable communities.

According to the outline, the budget will also provide funds to HUD to combat mortgage fraud and predatory lending and strengthen fair housing enforcement. In addition, a joint HUDEnergy Department innovation fund would support the creation of an energy- efficient housing market, including the retrofitting of older buildings.

Congress completes work on ’09 funding, approves stimulus bill

While preparing to deal with funding for the federal government in 2010, Congress also completed work on fiscal 2009 appropriations and approved a mammoth economic stimulus bill that includes billions of dollars for housing.

The omnibus 2009 appropriations measure (H.R. 1105) includes $41.5 billion in discretionary budget authority for HUD. The department had been operating on a continuing resolution.

The bill provides $16.8 billion for Sec. 8 tenant-based assistance, including $15 billion for renewals, and $7.1 billion for Sec. 8 project-based aid, with $6.9 billion for renewals.

For public housing, the bill includes $2.4 billion for the capital fund, $4.5 billion for the operating fund, and $120 million for the HOPE VI program for the revitalization of severely distressed housing. Other major HUD funding provisions include $3.9 billion for community development, with $3.6 billion allocated to formula CDBGs; $1.8 billion for HOME; $1.7 billion for homeless assistance; $765 million for Sec. 202 housing for the elderly; $250 million for Sec. 811 housing for the disabled; $645 million for Indian housing block grants; and $310 million for housing opportunities for persons with AIDS.

The bill sets commitment limits of $315 billion for the Federal Housing Administration Mutual Mortgage Insurance Fund; $45 billion for the General and Special Risk account, which insures multifamily mortgages; and $300 billion for Ginnie Mae mortgagebacked securities.

For rural housing, the funding bill provides $69.5 million for Sec. 515 rural rental housing loans, $129.1 million for Sec. 538 guaranteed multifamily loans, $902.5 million for rural rental assistance, $1.1 billion for Sec. 502 direct home loans, and $6.2 billion for Sec. 502 guaranteed loans.

The $787 billion economic stimulus bill (H.R. 1), the American Recovery and Reinvestment Act, includes two measures to address the sagging low-income housing tax credit equity market.

One provision allows state housing finance agencies to exchange a portion of their tax credit authority—up to 40 percent of their 2009 credits and 100 percent of their unused 2008 credits and returned credits—for Treasury Department grants equal to 85 percent of the 10-year credit amount. In effect, the swap would allow state agencies to provide the equivalent of an equity investment at a price of $0.85 per tax credit dollar. The grants can be used for projects with or without tax credits, but tax credit program rules will apply in either case.

The second provision gives HUD $2.25 billion in tax credit assistance funds to be allocated to state agencies through the HOME funding formula for aid to projects receiving tax credit allocations in 2007, 2008, and 2009. The stimulus bill also includes $2 billion for Sec. 8 project- based assistance to support 12-month contract renewals; $1.5 billion for homelessness prevention and re-housing efforts; $4 billion in public housing capital funds; $2 billion to be allocated through the Neighborhood Stabilization Program to redevelop foreclosed and abandoned homes; $1 billion for CDBGs; $510 million for Indian housing block grants; and $250 million for green investments and energy retrofitting of HUD-assisted housing.

Foreclosure crisis efforts continue

Outside of the budget and appropriations process, the home mortgage foreclosure crisis continues to dominate housing-related activity in Washington, with both the administration and Congress pushing relief measures.

The administration’s program includes the refinancing of mortgages held by Fannie and Freddie that don’t exceed 105 percent of the current property value and the modification of other loans where borrowers are facing potential foreclosure. The Treasury Department announced standardized guidelines for modifications, with eligibility limited to loans originated on or before Jan. 1, 2009, with principal balances up to the high-cost conforming loan limit, which is $729,750 for a one-family dwelling.

Barry G. Jacobs is editor of Housing and Development Reporter, the nation’s premier source for in-depth, factual coverage of all aspects of affordable housing and community development. The two-part publication includes informed reports and insightful analyses in “HDR Current Developments,” and an up-to-date compilation of essential documents in the “HDR Reference Files.” Jacobs is also the author of the annually updated HDR Handbook of Housing and Development Law. For more information, call (800) 723-8077.