WASHINGTON (Reuters) - More than 30 Democrats in the U.S. Senate called on Friday for the regulator of government-controlled Fannie Mae and Freddie Mac to direct the companies to resume contributions for affordable housing initiatives.
The senators focused on two unused funds that Congress established in 2008 to finance low-income housing with a portion of Fannie Mae and Freddie Mac’s revenue. The Federal Housing Finance Agency, the companies’ regulator, suspended payments into the funds in November of that year, after the government seized the companies as mortgage losses mounted.
After suffering huge losses, the companies have turned the corner and are now seeing record profits. The 33 lawmakers, led by Democrats Jack Reed of Rhode Island and Elizabeth Warren of Massachusetts and independent Bernie Sanders of Vermont, want the agency to resume contributing to the fund to help ameliorate a shortage of affordable housing for low-income Americans.
“The time is long overdue to lift the current suspension of contributions, and we ask your full and fair consideration of our request,” the letter to newly installed FHFA Director Mel Watt said.
Fannie Mae and Freddie Mac have taken $187.5 billion in U.S. aid since they became state wards in September 2008. They have since paid about $185.2 billion in dividends to the government thanks to a surge in the U.S. housing market.
Congress created the two housing trust funds to build a revenue source for low-income housing. The trust funds provide funds to finance new rental housing or rehabilitate existing units for families with very low incomes.
The group of Democrats cited a study from the Harvard Joint Center for Housing Studies that found many renters remain caught in a pinch due to falling wages and rising rents. According to the study, the country faces a shortage of nearly 5 million units that are affordable and available for extremely low-income renters.
Using the trust funds “would help ameliorate this crisis,” the letter said.
President Barack Obama and lawmakers from both parties have said they want to wind down the two mortgage finance giants, which own or guarantee 60 percent of all U.S. home loans, but an overhaul process is years off.
In the meantime, their return to profitability has led to competing demands.
Nonprofit housing groups have sued the FHFA, challenging the decision to suspend payments to the trust funds, while a large hedge fund that owns preferred shares of the companies is challenging the terms of their taxpayer bailout, which requires them to sweep most of the profits into the U.S. Treasury.
Reporting by Margaret Chadbourn; Editing by David Gregorio