WASHINGTON, July 9 Two non-profit housing advocacy groups on Tuesday sued the regulator of Fannie Mae and Freddie Mac for prohibiting the government-run companies to finance a federal affordable-housing trust fund established by Congress.
The National Housing Trust Fund, set up in 2008, has never received contributions from Fannie Mae or Freddie Mac, as originally intended by Congress. The fund, which aims to provide subsidies to rehabilitate and fund low-income housing, hasn't been capitalized because the regulator has kept Fannie and Freddie from contributing since the height of the financial crisis when the two companies crashed.
Now that the two mortgage finance companies have returned to profitability, housing advocates want to see the trust fund restored. The conditions that prompted the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, to suspend payments in 2008 no longer exist, the groups claim.
Sheila Crowley, president of the National Low Income Housing Coalition, said the FHFA was dragging its feet in not allowing Fannie Mae and Freddie Mac to support the fund.
"The delay caused by the Federal Housing Finance Agency is unconscionable, given the growing shortage of housing that is affordable for the lowest income Americans," said Crowley, whose organization is one of the plaintiffs.
The group filed the suit, along with four individuals and the Right to the City Alliance, in the U.S. District Court for the Southern District of Florida. They are seeking to force Fannie Mae and Freddie Mac to make payments into the trust fund.
Since they were taken over by the government in 2008, Fannie Mae and Freddie Mac have drawn $187.5 billion in taxpayer aid. By the end of June, they have paid about $132 billion in dividends to taxpayers for the support.
The advocacy groups estimate that FHFA has kept Fannie and Freddie from making $382 million in payments to the affordable-housing fund.
The improved financial footing of the companies has prompted various stakeholders to attempt to take hold of their profits.
On Sunday, a hedge fund filed a lawsuit against both the U.S. Treasury and the FHFA alleging they violated the 2008 law that put Fannie Mae and Freddie Mac into conservatorship.
Perry Capital, which began investing in both firms in 2010, claimed in the lawsuit that shareholder value was impaired when the government instituted new terms on the bailout agreement last year.
Under the new terms, Fannie and Freddie must turn over most of their profits to the government. Previously they had been required to pay a quarterly dividend of only 10 percent on the government's nearly 80 percent stake.