By Tracy M. Evans, Associate, Saxon, Gilmore, Carraway & Gibbons, P.A.
On July 9, 2013, a lawsuit was filed in the Southern District of Florida against the regulator of Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA) and its acting director, Edward DeMarco. The lawsuit was filed by four members of extremely low-income households and two non-profit corporations, the National Low Income Housing Coalition, and the Right to the City Alliance. These two corporations are made up individuals, some of whom are extremely low-income individuals in need of affordable housing, along with other local and state organizations. The suit challenges the decision of FHFA to indefinitely suspend financing of the National Housing Trust Fund (the “Housing Trust Fund”).
The Housing Trust Fund was created in July of 2008 as part of the Housing and Economic Recovery Act of 2008. The purpose of the Housing Trust Fund was to provide subsidies to rehabilitate and fund low-income housing, including increasing and maintaining the supply of available rental housing for low-income families. Congress mandated that the Housing Trust Fund was to be financed by a small portion of the annual revenue of Fannie Mae and Freddie Mac. Shortly after the creation of the Housing Trust Fund, in November of 2008, Fannie Mae and Freddie Mac collapsed and were rescued by the federal government which named FHFA as Conservator. As Conservator, FHFA suspended all contributions to the Housing Trust Fund under a section of the statute which permits temporary suspension of the payments in the event of the significant financial hardship of the companies. No contributions have been made to the Housing Trust Fund since the suspension.
Since 2008, Fannie Mae and Freddie Mac have significantly improved financially, reporting large profits for 2012. Due to the financial stability and success of these companies, the suit seeks to remove FHFA’s suspension of the Housing Trust Fund contributions and require Fannie Mae and Freddie Mac to make payments to the Housing Trust Fund pursuant to the Congressional mandate. The suit alleges that the 2008 suspension was never temporary or time-limited as required by the statute, and FHFA has failed to review the suspension in light of the changed financial circumstances of Fannie Mae and Freddie Mac. If the suit is successful, the National Low Income House Coalition estimates that Florida would stand to gain $50 million of every $1 billion invested into the Housing Trust Fund for the primary purpose of developing affordable housing for extremely low-income households.
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