MR. REED: Mr. President, today I introduce the Government Sponsored Enterprise Mission Improvement Act of 2007. This bill would amend the Housing and Community Development Act of 1992 to dramatically strengthen the affordable housing mission of Fannie Mae and Freddie Mac. I believe that deepening Fannie and Freddie's responsibilities towards affordable housing must be a part of any type of GSE reform that we undertake in the Senate.
The problems caused by the shortage in affordable housing are well publicized. But the impact of the shortage, which most commonly affects those near the bottom of the income scale, receives less attention. Worse, there is currently no Federal housing program that increases the supply of housing affordable to those with the most severe needs. The bill I am introducing today, the Government Sponsored Enterprise Mission Improvement Act, would provide $500 to $900 million per year in funding to help those with worst case housing needs.
Across the U.S., the 17 million renters and owners with lowest incomes have by far the most critical housing problems. About three-fifths of renters and owners with incomes below 30 percent of area median income pay more than half of their meager incomes for housing.
Families must pay such excessive amounts because there are too few affordable units. Nationally, according to HUD's analysis of 2005 American Housing Survey data, there were 10 million renters with incomes below 30 percent of area median income in 2005, but only 6.7 million units with rents affordable to those with such incomes.
This bill I am introducing today would require Fannie Mae and Freddie Mac to set aside 4.2 basis points on each dollar of unpaid principle balance of total new business purchases for an Affordable Housing Program.
Sixty-five percent of this set-aside would go towards an Affordable Housing Block Grant Program. This program would be managed by the Secretary of Housing and Urban Development and in the first year after enactment, would be allocated to the states by formula grant to help address the current subprime mortgage crisis. These grants could be used to facilitate loan modification and refinance options for low- and moderate-income borrowers facing foreclosure. Some of the funding could also be used to help low- and moderate-income homebuyers purchase properties that have been foreclosed upon to help stabilize neighborhoods.
After 2008, the funding would be distributed by formula grants to the states for the development, construction, and preservation of housing for very low- and extremely low-income families. This funding would complement other Federal and State programs, such as the HOME Investment Partnerships and Low-Income Housing Tax Credit programs, to bring down costs enough to primarily target the income group most needing housing that is truly affordable to them, extremely low-income renters.
The other 35 percent of this set-aside would be allocated for a Capital Magnet Fund managed by the Secretary of the Treasury. This funding would go out through competitive grants for financial activities that leverage affordable housing development, construction and preservation for low-, very low-, and extremely low-income families. It could also be used for economic development activities or community service facilities, such as day care centers and health care clinics, that in conjunction with affordable housing activities implement a concerted strategy to stabilize or revitalize a low-income community or underserved rural area.
The Government Sponsored Enterprise Mission Improvement Act also would strengthen Fannie and Freddie's Affordable Housing Goals. In particular, it would align their goals with current Community Reinvestment Act income targeting definitions, which I believe should help the lower end of the conventional market become more liquid.
Finally, this legislation would create a new statutory duty for Fannie Mae and Freddie Mac to serve underserved markets'' that lack adequate credit through conventional lending sources such as Manufactured Housing; Affordable Housing Preservation; Subprime Borrowers; Community Development Financial Institutions; and Rural Housing. I give teeth to this provision by making compliance with this duty subject to Section 1336 enforcement provisions.
I urge my colleagues to cosponsor this legislation and to help make it an integral part of any GSE reform that is taken up by the Senate. This bill makes it clear that with Fannie and Freddie's Government benefits come many important responsibilities.
Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.