Six years after a temporary suspension was issued to Fannie Mae and Freddie Mac, the Federal Housing Finance Authority (FHFA) on Dec. 11 instructed both government-sponsored enterprises (GSEs) to begin allocating funds to the Housing Trust Fund and the Capital Magnet Fund.
The Housing Trust Fund, created by the Housing and Economic Recovery Act of 2008, complements state and federal efforts to “increase and preserve the supply” of affordable housing, according to the Department of Housing and Urban Development.
The Capital Magnet Fund awards competitive grants to community development financial institutions and other organizations to develop affordable housing.
The GSEs were supposed to be contributing to those funds since the act’s passage in 2008 but FHFA put a temporary suspension on those allocations on Nov. 13, 2008.
In a letter to the heads of each GSE, FHFA Director Mel Watt said it was time to restart the allocations. Each GSE is required to set aside 4.2 basis points of each dollar of the unpaid principal of new business purchases each fiscal year to the funds.
In lifting the suspension, Watt said in the letters that the allocations would not contribute to the financial instability of either GSE. His letter to Fannie Mae cited the lack of need for Treasury Department draws since 2011 and the $99 billion in dividends that Fannie has paid to Treasury since 2013. As for Freddie Mac, he cited its lack of Treasury draws since early 2012 and the $64.4 billion in dividends paid to Treasury since 2013.
“While the profit levels Fannie Mae has experienced since 2012 are not expected to be sustainable, reasonable projections indicate that Fannie Mae will remain profitable for the foreseeable future,” Watt wrote, using the same language in his letter to Freddie Mac.