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WASHINGTON, DC-The Federal Housing Finance Regulatory Reform Act of 2008, approved yesterday by the Senate Banking, Housing, and Urban Affairs Committee, created a permanent affordable housing trust fund. The fund is a longstanding goal of housing advocates to finance the development or rehabilitation of 1.5 million affordable homes over the course of 10 years. However, the intended financing for the fund has been temporarily diverted to pay for a plan that will offer relief for homeowners facing foreclosure, according to the National Low Income Housing Coalition, which has been advocating for this fund for several years.

Funding for the trust fund was to come from Fannie Mae and Freddie Mac and possibly the expansion of the Federal Housing Administration’s home equity conversion mortgage product, as well as any other sources that could later be identified. The national trust fund, as it is called, would reserve at least 75% of the money for households that are extremely low income, earning less than 30% of an area’s median income. Legislation to establish the trust fund, and its capital sources, passed last year in the House of Representatives.

Originally, it had been expected that the fund would not be capitalized for about a year, with the money from Fannie and Freddie expected to be devoted to other related projects, such as housing on the Gulf Coast, Linda Couch, NLIHC deputy director, tells GlobeSt.com. The Senate version of the bill is extending that waiting period for another two years to pay for the mortgage bailout plan. Half of the money originally intended for the housing trust fund will be diverted in the first year it had expected to receive funding, and 25% in the second year. After that point, the funds will go to the housing trust fund. “We will be looking to identify other sources of funding in the meanwhile,” Couch says.

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