FHFA Directs Fannie, Freddie to Start Funding Housing Trust, Capital Magnet Funds
On Dec. 11, 2014, Federal Housing Finance Agency (FHFA) Director Melvin L. Watt instructed Fannie Mae and Freddie Mac to begin setting aside and allocating funds for the Housing Trust Fund and the Capital Magnet Fund. Congress created the two funds in 2008 under the Housing and Economic Recovery Act of 2008 (HERA) to provide financing for the production and preservation of affordable housing. However, they have been empty since they were created six years ago due to Fannie Mae and Freddie Mac being placed into conservatorship.
Most grants from the Housing Trust Fund would be for affordable rental housing that targets extremely low-income households. Similarly, the Community Development Financial Institutions, or CDFI Fund, provides competitively awarded grants to CDFIs and qualified housing nonprofits through the Capital Magnet Fund. Capital Magnet Fund awards can be used to finance affordable housing, as well as related economic development activities and community service facilities.
In the letters to Fannie Mae and Freddie Mac, Director Watt instructed Fannie Mae and Freddie Mac to begin allocating funds under the following terms:
- Starting FY 2015, which begins on Jan. 1, 2015, Fannie Mae and Freddie Mac will begin setting aside an amount equal to 4.2 basis points of each dollar of unpaid balance of total new business purchases;
- Within 60 days after the end of the fiscal year, in January or February of 2016, Fannie Mae and Freddie Mac will transfer the funds, unless they drew funds from the Treasury during the fiscal year or the transfer would cause them to require a draw of funds from the Treasury; and
- Of the funds being transferred from Fannie Mae and Freddie Mac, 65 percent will be allocated to HUD to fund the Housing Trust Fund and 35 percent will be transferred to the Capital Magnet Fund operated by the Treasury.