[Budget of the United States Government]
[VI. Investing in the Common Good: Program Performance in Federal Functions]
[19. Commerce and Housing Credit]
[From the U.S. Government Publishing Office, www.gpo.gov]


 
                    19.  COMMERCE AND HOUSING CREDIT

  ----------------------------------------------------------------------

                    Table 19-1.  FEDERAL RESOURCES IN SUPPORT OF COMMERCE AND HOUSING CREDIT
                                            (In millions of dollars)
----------------------------------------------------------------------------------------------------------------
                                                                               Estimate
               Function 370                   1998   -----------------------------------------------------------
                                             Actual     1999      2000      2001      2002      2003      2004
----------------------------------------------------------------------------------------------------------------
Spending:
  Discretionary Budget Authority..........     3,128     3,704     5,369     3,343     2,863     2,902     2,941
  Mandatory Outlays:
    Existing law..........................    -2,160    -3,058     1,179     4,054     6,224     6,563     7,024
    Proposed legislation..................  ........  ........       -86       -95      -103      -112      -123
Credit Activity:
  Direct loan disbursements...............     1,944     1,749     1,571       N/A       N/A       N/A       N/A
  Guaranteed loans........................   256,139   233,210   250,891       N/A       N/A       N/A       N/A
Tax Expenditures:
  Existing law............................   219,320   227,555   236,210   245,090   254,415   261,795   268,275
  Proposed legislation....................  ........       -52    -1,306    -2,190    -2,016    -1,804    -1,783
----------------------------------------------------------------------------------------------------------------
N/A = Not available

  ----------------------------------------------------------------------
  The Federal Government facilitates commerce and supports housing in a 
range of ways. It provides direct loans and loan guarantees to ease 
access to mortgage and commercial credit; sponsors private enterprises 
that support the secondary market for home mortgages; regulates private 
credit intermediaries, especially depository institutions; protects 
investors when insured depository institutions fail; promotes exports 
and technology; collects our Nation's statistics; and offers tax 
incentives. (The Government also provides subsidies for low-income 
housing through programs classified in the Income Security function.)

Mortgage Credit

  The Government provides loans and loan guarantees to increase 
homeownership, and to help low-income families afford suitable 
apartments. Housing credit programs of the Departments of Housing and 
Urban Development (HUD), Agriculture (USDA), and Veterans Affairs (VA) 
supported $150 billion in loan and loan guarantee commitments in 1998, 
helping more than 1.7 million households (see Table 19-2). All of these 
programs have contributed to the success of the President's National 
Homeownership Initiative which, along with a strong economy, has helped 
boost the national homeownership rate to 66.8 percent--its highest ever.
  In 2000, the national homeownership rate will be 67.5 percent.

  HUD's Mutual Mortgage Insurance (MMI) Fund: The MMI Fund, run by the 
Federal Housing Administration (FHA), helps increase access to single-
family mortgage credit in both urban and rural areas. In 1998, the MMI 
Fund guaranteed over $90 billion in mortgages for over one million 
households. Nearly three-fourths of such mortgages went to first-time 
homebuyers.
  The FHA/MMI fund will continue to remain solvent and self-
          sustaining.
  In 2000 the share of FHA mortgage insurance for first-time 
          homebuyers will increase by one percent a year over 1995 
          levels to 73.3 percent in 2000.

  USDA's Rural Housing Service (RHS): RHS offers direct and guaranteed 
loans and grants to help very low- to moderate-income

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  Table 19-2.  SELECTED FEDERAL COMMERCE AND HOUSING CREDIT PROGRAMS: CREDIT PROGRAMS PORTFOLIO CHARACTERISTICS
                                          (Dollar amounts in millions)
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                                                                                Numbers of
                                                          Dollar volume of    housing units/    Dollar volume of
                                                           direct loans/      small business   total outstanding
                                                             guarantees     financed by loans/  loans/guarantees
                                                          written in 1998       guarantees      as of the end of
                                                                             written in 1998          1998
----------------------------------------------------------------------------------------------------------------
Mortgage Credit:
  HUD/FHA Mutual Mortgage Insurance Fund...............             90,518          1,025,024            380,338
  HUD/FHA General Insurance and Special Risk Insurance
   Fund................................................             15,074            277,011             89,287
  USDA/RHS single-family loans.........................              3,830             56,617             23,626
  USDA/RHS multifamily loans...........................                218              9,628             11,902
  VA guaranteed loans..................................             39,862            368,791            169,006
                                                        --------------------------------------------------------
    Subtotal, Mortgage Credit..........................            149,502          1,737,071            674,159
 
SBA Guaranteed Loans...................................             11,524             45,019             33,695
                                                        --------------------------------------------------------
    Total Assistance...................................            161,026          1,782,090            707,854
----------------------------------------------------------------------------------------------------------------

   rural residents buy and maintain adequate, affordable housing. The 
  single family direct loan program provides subsidized loans to very 
  low-income rural residents, while the single family guarantee loan 
  program guarantees up to 90 percent of a private loan for moderate-
  income rural residents. Together, the two programs provided $3.8 
  billion in loans and loan guarantees in 1998, providing 56,617 decent, 
  safe affordable homes for rural Americans.----------------------------
  In 2000, RHS will further reduce the number of rural residents 
          living in substandard housing by providing $4.3 billion in 
          loans and loan guarantees for 50,500 new or improved homes.

  Veterans' Affairs (VA): VA recognizes the service that veterans and 
active duty personnel provide to the Nation by helping them buy and 
retain homes. The Government partially guarantees the loans from private 
lenders, providing $40 billion in loan guarantees in 1998. One of VA's 
key goals is to improve loan servicing to avoid veteran foreclosures.
  In 2000, VA will be successful in intervening to help veterans 
          avoid foreclosure 41 percent of the time, from the 1998 level 
          of 37 percent. (See Chapter 27 for more information.)

  Ginnie Mae: Congress created Ginnie Mae in 1968 to support the 
secondary market for FHA, VA, and USDA mortgages through securitization. 
To date, Ginnie Mae has helped over 20 million low- and moderate-income 
families buy homes.
  In 2000, Ginnie Mae will continue to securitize 95 percent of 
          FHA and VA loans, enhancing mortgage market efficiency and 
          lowering financing costs for home buyers.

Rental Housing

  The Federal Government provides housing assistance through a number of 
HUD and USDA programs in the Income Security function. HUD's rental 
programs provided subsidies for over 4.8 million very-low-income 
households in 1998. In addition, USDA's RHS rental assistance grants to 
low-income rural households provided $547 million to support 39,000 new 
and existing rental units in 1998. For 2000, agencies will meet the 
following performance goals:

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  RHS will make new and continued rental assistance commitments 
          to fund 44,400 new and existing units.
  Increase the percentage of Section 8 families with children 
          living in low-poverty census tracts from 61 percent in 1998 to 
          63 percent.

Public Housing and Other Assisted Housing Programs

  The Federal Government funds capital and management improvements of 
public housing authorities across the country. The Government also funds 
programs supporting the housing needs of particular populations, such as 
the elderly and disabled.
  Demolish over 13,000 public housing units to move toward the 
          Administration's goal of demolishing 100,000 of the worst 
          public housing units by 2003.
  Help 3,000 low-income, frail elderly live as independently as 
          possible by financing conversion of conventional subsidized 
          apartments to assisted living.

Housing Tax Incentives

  The Government provides significant support for housing through tax 
preferences. The two largest tax benefits are the mortgage interest 
deduction for owner-occupied homes (which will cost the Government $55.1 
billion in 2000) and the deductibility of State and local property tax 
on owner-occupied homes (costing $19.5 billion in 2000).
  Other tax provisions also encourage investment in housing: (1) capital 
gains of up to $500,000 on home sales are exempt from taxes (costing $98 
billion from 2000 to 2004); (2) States and localities can issue tax-
exempt mortgage revenue bonds, whose proceeds subsidize purchases by 
first-time, low- and moderate-income home buyers (costing $1 billion in 
2000); and (3) installment sales provisions let some real estate sellers 
defer taxes. Finally, the low-income housing tax credit provides 
incentives for constructing or renovating rental housing that helps low-
income tenants (costing about $3.3 billion in 2000). The President 
reproposes to raise the volume cap on the low-income housing tax credit, 
and further proposes to provide permanent authorization for 15,000 new 
housing vouchers for extremely low-income elderly linked to Low-Income 
Housing Tax Credit properties.

Commerce, Technology, and International Trade

  Technology Policy: The Commerce Department promotes the development of 
technology and advocates sound technology policies. Commerce's Patent 
and Trademark Office (PTO) protects U.S. intellectual property rights 
around the world through bilateral and multilateral negotiation, and 
through its domestic patent and trademark system.
  In 2000, PTO will issue over 154,000 patents, reduce the 
          average processing time for inventions from the 1999 average 
          of 10.9 months to an average of 10.2 months, and attain a 70 
          percent customer satisfaction measure.
  In 2000, PTO will reduce the average time required for 
          processing trademark applications from the 1999 average of 
          15.5 months to an average of 13.8 months, and attain an 80 
          percent customer satisfaction measure.

  Commerce's National Institute of Standards and Technology (NIST): NIST 
works with industry to develop and apply technology, measurements, and 
standards. NIST administers the Manufacturing Extension Partnership 
(MEP), which makes technological information and expertise available to 
smaller manufacturers.
  In 2000, NIST laboratories will produce over 2,100 technical 
          publications and offer 1,330 standard reference materials.
  In 2000, MEP will serve 36,250 clients, increasing their sales 
          by $591 million and generating $459 million in additional 
          capital investment.

  The International Trade Administration (ITA): ITA strives to promote 
an improved trade posture for U.S. industry and develop the export 
potential of U.S. firms in a manner consistent with U.S. foreign and 
economic policy.
  In 2000, ITA will provide counseling assistance to 14,000 
          small businesses, an increase of 3,500 over 1999 efforts.

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  In 2000, ITA's Advocacy Center will support $10.5 billion in 
          exports $500 million more than 1999.

  Commerce's Bureau of Export Administration (BXA): The BXA is a 
regulatory agency that enforces U.S. export controls.
  In 2000, BXA will issue 10,400 licenses for dual use 
          commodities (military or civilian use), 400 more than in 1999.

  Commerce's Census Bureau and Bureau of Economic Analysis (BEA): The 
Census Bureau collects, tabulates, and distributes a wide variety of 
statistical information about Americans and the economy, including the 
constitutionally-mandated decennial census. In addition, BEA prepares 
and interprets U.S. economic accounts, including the Gross Domestic 
Product (GDP).
  In 2000, the Census Bureau will conduct a decennial census. 
          The goal is to count 99.9 percent of the population, thus 
          reducing the 1990 undercount of 1.6 percent to 0.1 percent.

  Small Business Administration (SBA): SBA assists and promotes small 
business by expanding access to capital through guaranteed private 
sector loans that carry longer terms and lower interest rates than those 
for which small businesses would otherwise qualify. SBA guaranteed over 
$11.5 billion in small business loans in 1998.
  In 2000, SBA will work to increase the number of small 
          businesses receiving counseling and training to 1.3 million, 
          an eight percent increase over the estimated 1999 level.
   SBA will guarantee 63,000 new Sec. 7(a) and Sec. 504 business 
          loans in 2000, a 13 percent increase over the projected 1999 
          volume of 55,600.
   Following authorization in 2000, America's Private Investment 
          Companies and the New Market Ventures Capital programs will 
          commit a combined $1.1 billion to private venture capital 
          firms, which the firms will leverage with private-sector 
          captial to make $1.7 billion in total business investments in 
          low- and moderate-income areas.

Financial Regulation

   Federal Deposit Insurance: Federal deposit insurance protects 
depositors against losses when insured commercial banks, thrifts 
(savings institutions), and credit unions fail. From 1985 to 1995, this 
insurance protected depositors in over 1,400 failed banks and 1,100 
thrifts, with total deposits of over $700 billion. Five agencies 
regulate federally-insured depository institutions to ensure their 
safety and soundness: the Office of the Comptroller of the Currency 
regulates national banks; the Office of Thrift Supervision regulates 
thrifts; the Federal Reserve regulates State-chartered banks that are 
Federal Reserve members; the Federal Deposit Insurance Corporation 
(FDIC) regulates other State-chartered banks; and the National Credit 
Union Administration (NCUA) regulates credit unions.
   In calendar 2000, the FDIC will perform 2,928 safety and 
          soundness examinations.
   In calendar 2000, the NCUA will reduce by seven percent (from 
          372 to 346) the number of federally insured credit unions with 
          net capital of less than six percent.

   SEC and CFTC: The Securities and Exchange Commission (SEC) oversees 
U.S. capital markets and regulates the securities industry. The 
Commodity Futures Trading Commission (CFTC) regulates U.S. futures and 
options markets. Both regulators protect investors by preventing fraud 
and abuse in U.S. capital markets and ensuring adequate disclosure of 
information.
   The SEC will examine every investment company complex and 
          every investment advisor at least once during each five-year 
          examination cycle.
   The CFTC will review every designation application and rule 
          change request, except for stock index futures (which require 
          SEC approval) within 10 to 45 days and respond to trading 
          exchanges (e.g., Chicago Board of Trade) with an approval or 
          deficiency letter.

  Federal Trade Commission (FTC)
  The FTC enforces various consumer protection and antitrust laws that 
prohibit fraud, deception, anticompetitive mergers, and other

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unfair and anticompetitive business practices in the marketplace.
   In 2000, the FTC will save consumers $200 million by stopping 
          fraud and other unfair practices, and another $200 million by 
          stopping anticompetitive behavior.

Federal Communications Commission (FCC)

  The FCC works to encourage competition in communications and to 
promote and support every American's access to telecommunications 
services. Through introduction of more efficient licensing and 
authorization processes, the FCC will ensure a more rapid introduction 
of new services and technologies. The FCC's policy and rulemaking 
process promotes a deregulatory, pro-competitive environment, ensures 
efficient spectrum use, and sets guidelines for equipment and services 
so that all Americans have access to telecommunications services.
   In 2000, the FCC will achieve 90 percent of enforcement, 
          licensing and service authorization activities within 
          established deadlines.

Commerce Tax Incentives

  The tax law provides incentives to encourage business investment. It 
taxes capital gains at a lower rate than other income. This will cost 
the Government $496 billion in 2000. In addition, the law does not tax 
gains on inherited capital assets that accrue during the lifetime of the 
original owner. This will cost $27.1 billion from 2000 to 2004. The law 
also provides more generous depreciation allowances for machinery, 
equipment, and buildings. Other tax provisions benefit small firms 
generally, including the graduated corporate income tax rates, 
preferential capital gains tax treatment for small corporation stock, 
and write-offs of certain investments. Credit unions, small insurance 
companies, and insurance companies owned by certain tax-exempt 
organizations also enjoy tax preferences. Tax benefits for other kinds 
of businesses are described in other chapters in Section VI.