4. CAPITOL HILL PERSPECTIVE Clinton Jones
Senior Counsel
House Committee on Financial Services
Washington, D.C.
Let me take a few minutes to talk about some of the priorities that we’re working on and some of the legislation.
We have three things we are working on at the moment. One is the GSE legislation. There’s been a lot of publicity, a lot of reports on issues related to Fannie Mae or Freddie Mac. We’re currently in the process of moving a Bill that creates new regulators for Fannie Mae and Freddie Mac. We had a mark-up on the Bill this week that, in the Committee, we actually reported a Bill out after amendments and deliberation; that was the Wednesday before the Memorial Day recess. We created this new regulator; one aspect that you probably have a particular interest in is that we had an Affordable Housing section with goals so it would be very clear on the type of goals they would have to meet.
We have single-family goals with a delineator on that to consider 80% of area median income, they have to focus on low income families or neighborhoods that are considered low income defined by census tract.
GSE multi-family goal We also have a multi-family goal. Within that goal, we are giving the Director the authority to establish further requirements to assure that Fannie Mae and Freddie Mac meet certain goals that address smaller multi-family developments. The concern that we have in putting the goals together is that Fannie Mae and Freddie Mac would be given the same multi-family goal, they would go to the urban centers — California, New York — and never really address smaller multi-family developments in some of the smaller areas, particularly rural areas.
We also inserted language that said they had to do certain underserved markets, that included manufactured housing and preservation of Affordable Housing developments as well as a special category: rural and other underserved areas.
We are not sure what the new products will be in the next 10 or 15 years. The assumption is that once we pass this Bill, we won’t have the opportunity to go back and amend it, so we wanted to be as flexible as possible to the regulator to push Fannie and Freddie into markets they should be serving without tying their hand now with the product they have. So we think that if the Bill is enacted into law, that you would see definitely more emphasis, I think, on low income and very low income areas — rural areas and non-urban areas. We’re very happy about that.
FHLB model My question always is: what are the prospects for that? Obviously, it is a controversial Bill, however, it passed out of the Committee 65 to 5: 65 affirmative, 5 no. It is going to the Floor.
We had a provision in there to create an Affordable Housing Fund using 5% of the after tax profit of Fannie Mae and Freddie Mac, to develop Affordable Housing on the multi-family side as well as on the single-family homeownership side. When I left we had a bunch of folks having problems with that particular provision; when I came back on Monday, some of that had dissipated using the model of the Federal Home Loan Bank System where it has a very effective and non-controversial Affordable Housing program.
I’m not sure where the Senate is.
So that’s obviously taking a lot of resources. I think it’s a very significant, hallmark piece of legislation. It will have some measurable impact on those that are interested in rural housing and development.
Predatory Lending The second piece of legislation is a Predatory Lending Bill. Congressman Ney, the subcommittee Chair, wants to address some of the issues involving abusive lending practices. He has introduced the Bill; I don’t know as much about it to give you the details. I assume the Bill will be referred to our Financial Institutions subcommittee. Somehow along the line, the Housing subcommittee had the referral also, and they are now looking to us to be the lead subcommittee in helping to move the Bill and develop new amendments. I think you’ll see a lot of energy on that particular Bill in the next few months. This will have, I think, a significant impact particularly on the sub-prime lending area dealing with those communities and those borrowers who have maybe not perfect credit scores or perfect credit scenarios, but there is a market for homeownership.
The third piece of legislation, which I’m actually excited about because I think I see some momentum for this, I think we will have a Section 8 voucher bill at least on the House side. We’ve been work with our Democratic counterparts. I think the consensus is that Mr. Ney and Mr. Oxley (R-OH) said they want something done; I think that what we’ll do is look at all the possibilities. Mr. Oxley always says that politics is the art of possibilities. I think whatever we can get a consensus on, whether that is rent simplification (as far as I’m concerned, if we don’t do anything with rent simplification, I’d be happy) or to put procedures in place to make the Section 8 voucher program work better, we’re working on that. We have ongoing discussions; of course, the Administration has their Bill and changed its mind. What I anticipate is that the Bill that comes out of the Committee will probably not reflect the Administration’s priorities, but I think it will be something they can live with.
The Rural Housing Service Budget proposal had some legislative ideas. Obviously, we would have really liked to be further in that process, so I’ll just tell you what happened and where we are now.
Last year, Tom Dorr who was a consultant in USDA, initiated some studies that I think culminate in that recommendation to rejuvenate the Section 515 program, to do some preservation, create a Voucher program, to try to address some of the issues — particularly understanding and realizing the developments that owners will be able to sell their projects. That is something I know you have been pushing for a while.
So we saw the information in the Budget. We know that in the bureaucracy it just takes a long time for the language to finally get delivered to the Hill. So what we did is we had the technical drafting service, which is kind of a slick way to bypass the bureaucracy — tell them, this is our idea, can you put the legislation together. So they gave us the language.
Language from Administration? There is a Congressman, Mr. Davis (R-KY), who is very interested in moving this, but as we perceived the language, it just didn’t seem adequate. In fact, we asked CARH to look at it and there were a lot of suggestions. The Administration said there was a lot more that could go in. I don’t think we felt like we need to proceed until we see the complete legislative language from the Administration. Well, it’s June and we’re still waiting for that legislation.
I think we have a great new Rural Housing Service Administrator, Mr. Russell Davis. Tom Dorr has been very hands-on as far as management, interested in what’s going on; but I think they are victims of bureaucracy at OMB, probably as well as at USDA. While I see that there’s this eagerness and desire, it seems like the paper flow is moving very slowly. We would have liked to have had it by next Tuesday, in fact it was on our calendar (we never announce way in advance when we are going to have hearings just because of incidents like this), but I didn’t think it was necessary to have a hearing if we don’t have language yet. I think we’ll have to wait and see when the legislation comes. I think it is our intent to be very helpful to the legislation; I think that in the Budget proposal there is $214 million for this particular initiative.
Plan now for the future If you have not already talked to the Rural Housing Service, I think you should talk to them more about this; I think this start is probably not a complete answer to some of the issues that are addressed in this particular program, but I think every year if you continue to make progress I think that you receive significant developments in the future. We would like to be partners with the Administration on this. Obviously, as we did when we received the technical drafting, we will reach out to CARH and others for input.
That’s a mouthful of initiatives right there. I think it is Mr. Ney’s and Mr. Oxley’s intent that when that language comes up that we will expedite it as much as we can. Of course we will be working with the Democrats; we have a good relationship. We don’t want this to be an adversarial process; we want it to be something that everyone can partner in.
The top three are just a handful; it is all we can do to keep standing up every day. I think the Affordable Housing Fund that you will see in the GSE legislation will be significant, with a significant impact on rural development. I think the housing goals as we write them will have a significant impact on Affordable Housing.
There’s a rush to move this legislation now because I figure when we get to 2006 (I felt it in 2004, but I really believe even more in 2006), I think because of the politics and the dynamics that you’ll see on the Hill, it will be very difficult to move any piece of legislation unless you have to. So you have Appropriations Bills, but I think because of the elections there is a sense of urgency on both sides that there will be a lot of things going on. I just can’t see, in that environment next year, getting a lot of legislation done. What we have, we need to move through the process now and at least have out of the door. I’m just not sure there will be the dynamics there next year.
That’s a mouthful. Thanks for having me.
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