[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
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Table 19-1. FEDERAL RESOURCES IN SUPPORT OF COMMERCE AND HOUSING CREDIT
(In millions of dollars)
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Estimate
Function 370 1998 -----------------------------------------------------------
Actual 1999 2000 2001 2002 2003 2004
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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
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N/A = Not available
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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
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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
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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.