Hill bill ensures Fannie and Freddie don’t withhold taxpayer dollars

U.S. Rep. French Hill (R-AR) on Dec. 6 introduced a bill aimed at preventing the bailout of government sponsored enterprises (GSEs).

Specifically, the GSE Jumpstart Reauthorization Act of 2017, H.R. 4560, would require GSEs to pay dividends into the U.S. Treasury Department before they could build up the Housing Trust Fund.

The Housing Trust Fund is exclusively targeted to help build, preserve and rehabilitate housing for households with “extremely low incomes,” defined as being at or below 30 percent of area median income, or less than the federal poverty guideline.

Fannie Mae and Freddie Mac, the nation’s behemoth mortgage industry GSEs, have been in government conservatorship for almost a decade following the global financial crisis in 2008. They contribute to the Housing Trust Fund.

“By allowing the GSEs to retain earnings is beside the point,” Rep. Hill said Dec. 11. “The U.S. Treasury still backs the GSEs with a line of credit standing at over $250 billion and, while Fannie and Freddie remain in conservatorship, the taxpayers continue to be on the hook.”

Rather than increasing taxpayer exposure by withholding money, said Hill, it’s now time for Congress “to mandate that the GSEs pay their bills to taxpayers before growing this [Housing] Trust Fund.”

Specifically, H.R. 4560 would prevent the Treasury Department from selling its GSE preferred shares. It also would suspend contributions by GSEs to the Housing Trust Fund during periods when the full required dividend payments mandated by the Senior Preferred Stock Purchase Agreements are not made.

Additionally, H.R. 4560 would extend for one year a provision in the Housing Finance Reform and Taxpayer Protection Act of 2014 that prevents the Treasury Department from selling its GSE Senior Preferred shares and its warrant for 79.9 percent of the GSEs’ common shares.

Rep. Hill’s proposed bill also would expand the current provision in the Housing and Economic Recovery Act (HERA) stating that the Federal Housing Finance Agency (FHFA) “shall temporarily suspend” GSE payments to the Housing Trust Fund if it thinks those payments would weaken their finances.

The bill also would tag an additional provision to HERA stipulating that if the GSEs fail to pay any of their dividends to Treasury in a year, then FHFA must prohibit payments to the Housing Trust Fund for that entire fiscal year.

H.R. 4560 has been referred to the House Financial Services Committee.