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WASHINGTON, DC-The House of Representatives has passed the Federal Housing Financial Reform Act of 2007. The bill calls for the overhaul of the regulatory structure of government-sponsored entities such as Fannie Mae and Freddie Mac and creates a National Housing Trust Fund for families at the extreme end of the low-income spectrum.

While reform of GSEs has been long anticipated, the creation of this fund has been touch-and-go since its original proposal. With the passage of H.R. 1427, “We have gotten further than we have ever had toward creating the fund,” a spokeswoman for the National Low Income Housing Coalition tells GlobeSt.com.

The bill reserves approximately $600 million a year from Fannie Mae and Freddie Mac to serve as a dedicated source of funding for the fund, which is meant to support the production, rehabilitation and preservation of 1.5 million rental homes over 10 years. At least 75% of these homes will be affordable to extremely low-income families.

The House started debate on the bill on May 17 and continued it on May 22. During the debate several amendments were proposed, debated and ultimately defeated. These included amendments that would cap the amount that could go into the affordable housing fund at $520 million annually. Another would have provided that, after 2007, all fund money would be used for HUD’s voucher program.

“On both sides of the aisle, members of Congress are hearing from their constituents about the acute shortage of affordable housing in their home districts and are recognizing their responsibility to expand the federal investment in the creation of housing that the lowest income people can afford,” says Sheila Crowley, president of NLIHC. “The funding in this bill is a major step toward that end.”

H.R. 1427 would also implement a regulatory overhaul of the GSEs, providing, for example, regional adjustments to the cap on mortgages the GSEs may buy for high-cost areas. The National Association of Realtors has praised the vote as a fair balance between safety and soundness while imposing statutory limitations on the portfolios.

Referring to the regional adjustments on mortgage caps for high cost areas, Pat Vredevoogd Combs, president of NAR, notes that, “this authority will helpmore working families in high-cost areas qualify for safer GSE loans. Veterans, teachers and nurses are examples of those who may benefit by not being forced into expensive nontraditional jumbo loans. This legislation would allow GSEs to adjust loan limits regionally.”

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