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

    [[Page 213]]

                        17.  COMMERCE AND HOUSING CREDIT

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                        Table 17-1.  Federal Resources in Support of Commerce and Housing Credit
                                                (In millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                   Estimate
                   Function 370                   1999   -----------------------------------------------------------
                                                 Actual     2000      2001      2002      2003      2004      2005
    ----------------------------------------------------------------------------------------------------------------
    Spending:
      Discretionary Budget Authority..........     3,838     7,226     3,456     3,311     3,279     3,193     3,262
      Mandatory Outlays:
        Existing law..........................      -862    -1,613      -767    -1,010    -1,507    -1,299      -657
        Proposed legislation..................  ........  ........       -96      -105      -118      -129      -143
    Credit Activity:
      Direct loan disbursements...............     2,125     1,780     2,041       N/A       N/A       N/A       N/A
      Guaranteed loans........................   306,630   263,988   273,937       N/A       N/A       N/A       N/A
    Tax Expenditures:
      Existing law............................   227,870   235,565   247,145   255,305   264,400   274,725   284,435
      Proposed legislation....................  ........  ........       330       533       531       631       790
    ----------------------------------------------------------------------------------------------------------------
    N/A = Not available.

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       The Federal Government facilitates commerce and supports housing
    through many diverse activities. 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; protects investors
    when insured depository institutions fail; promotes exports and
    technology; collects our Nation's statistics; and, offers tax
    incentives.

     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 $177 billion in loan and loan guarantee commitments in 1999,
    helping nearly two million households (see Table 17-2). 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 67 percent--its highest ever
    (see Chart 17-1). An additional 8.7 million families have become
    homeowners during this Administration.
       In 2001, 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 1999, the MMI
    Fund insured over $113 billion in mortgages for over 1.2 million
    households. Over 80 percent of FHA home purchase mortgages went to
    first-time home buyers.
       The share of FHA mortgage insurance for first-time home
              buyers will increase by one percentage point in 2001.
       In 2001, the homeownership rate among households with incomes
              less than median family income will increase by 0.5 percentage
              point to 52.5 percent.
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                           Table 17-2.  Selected Federal Commerce and Housing Credit Programs:
                                        Credit Programs Portfolio Characteristics
                                              (Dollar amounts in millions)
    ----------------------------------------------------------------------------------------------------------------
                                                                                    Numbers of
                                                              Dollar volume of    housing units/    Dollar volume of
                                                               direct loans/      small business   total outstanding
                                                                 guarantees     financed by loans/  loans/guarantees
                                                              written in 1999       guarantees      as of the end of
                                                                                 written in 1999          1999
    ----------------------------------------------------------------------------------------------------------------
    Mortgage Credit:
      HUD/FHA Mutual Mortgage Insurance Fund...............            113,217          1,219,928            411,474
      HUD/FHA General Insurance and Special Risk Insurance              16,924            247,943             92,597
       Fund................................................
      USDA/RHS single-family loans.........................              3,969             60,261             25,373
      USDA/RHS multifamily loans...........................                141             10,087             11,925
      VA guaranteed loans..................................             43,091            396,399            195,868
                                                            --------------------------------------------------------
        Subtotal, Mortgage Credit..........................            177,342          1,934,618            737,237

    Business Credit:.......................................
      SBA Guaranteed Loans.................................             13,906             45,629             41,132
      SBA Direct Loans.....................................                 40                 34                 48
                                                            --------------------------------------------------------
        Subtotal, SBA Loans................................             13,946             45,663             41,180
                                                            --------------------------------------------------------
        Total Assistance...................................            191,288          1,980,281            778,417
    ----------------------------------------------------------------------------------------------------------------

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    [[Page 214]]

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       USDA's Rural Housing Service (RHS): RHS offers direct and guaranteed
    loans and grants to help very low- to moderate-income 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 $4 billion in loans and loan
    guarantees in 1999, providing 60,261 decent, safe affordable homes for
    rural Americans. The Administration proposes to provide higher loan
    levels at lower cost by increasing the single family housing guarantee
    program loan fee from 1 percent to 2 percent. This change, along with
    RHS' successful efforts in leveraging, will allow more lending per
    dollar.
       In 2001, RHS will further reduce the number of rural
              residents living in substandard housing by providing $5
              billion in loans and loan guarantees for 68,000 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 $43 billion in loan guarantees in 1999. One of VA's
    key goals is to improve loan servicing to avoid veteran foreclosures.
       In 2001, VA will be successful in intervening to help
              veterans avoid foreclosure 40 percent of the time, an increase
              from the 1998 level of 37 percent. (See Chapter 25, ``Veterans
              Benefits and Services,'' for more information.)

       Ginnie Mae: Congress created Ginnie Mae in 1968 to support the
    secondary market for FHA, VA, and RHS mortgages through securitization.
    To date, Ginnie Mae has helped 22.7 million low- and moderate-income
    families buy homes.
       In 2001, Ginnie Mae will continue to securitize 95 percent of
              FHA and VA loans, enhancing mortgage market effi

    [[Page 215]]

              ciency 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 4.7 million very-low-income
    households in 1999. In addition, USDA's RHS rental assistance grants to
    low-income rural households provided $583 million to support 42,000 new
    and existing rental units in 1998. RHS's multifamily housing programs,
    which generally lends to private developers, finances both the
    construction and rehabilitation of rural rental housing for low- to
    moderate-income, elderly, and handicapped rural residents as well as
    farm laborers. The Budget provides $365 million in direct loans,
    providing over 7,500 new units for very-low income tenants in rural
    America. For 2001, these agencies intend to meet the following
    performance goals:
       Increase the percentage of families with children assisted by
              HUD's tenant-based Section 8 voucher program that live in low-
              poverty census tracts from 61 percent in 1999 to 64 percent in
              2001.
       The share of families that move from welfare to work while
              assisted by tenant-based Section 8, will increase from 32
              percent in 1999 to 34 percent in 2001.
       Increase to 78 percent the ratio of affordable units actually
              available to extremely-low-income renters, from 76 percent in
              1997.
       RHS will make new and continued rental assistance commitments
              to fund 43,800 rental assistance units.

     Public Housing and Other Assisted Housing Programs

      The Federal Government funds capital and management improvements of
    public housing authorities, as well as supportive services for public
    housing residents. These programs support the housing needs of
    particular popu

    [[Page 216]]

    lations, such as the elderly and disabled, in addition to low-income
    families.
       Public Housing Authorities demolished, 46,237 units of
              dilapidated public housing from 1993 through 1999 with an
              additional 14,800 scheduled for demolition in 2000. During
              2001, 12,000 more units will be demolished, moving the
              Administration toward the goal of demolishing 100,000 of the
              worst public housing units by 2003.

     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 $61
    billion in 2001 and $331 billion over five years) and the deductibility
    of State and local property tax on owner-occupied homes (costing $23
    billion in 2001 and $125 billion over five years).
       Other tax provisions also encourage investment in housing: (1)
    capital gains of up to $500,000 on home sales are exempt from taxes
    (costing $101 billion from 2001 to 2005); (2) States and localities can
    issue tax-exempt mortgage revenue bonds, whose proceeds subsidize
    purchases by first-time, low- and moderate-income home buyers; and, (3)
    installment sales provisions let some real estate sellers defer taxes.
    Finally, the low-income housing tax credit (LIHTC) provides incentives
    for constructing or renovating rental housing that helps low-income
    tenants (costing approximately $3.2 billion in 2001). The President
    proposes to raise the volume cap on the LIHTC and index the cap to
    inflation starting in 2002.

     Commerce, Technology, and International Trade

       Technology Policy: The Commerce Department advocates sound technology
    policies to promote technology development. Commerce's Patent and
    Trademark Office (PTO) protects U.S. intellectual property rights around
    the world through international treaties. In 1999, the patent and
    trademark system was strengthened with the passage of legislation to
    reform patent law and make the PTO into a performance-based organization
    to better serve America's entrepreneurs and innovators.
       In 2001, PTO will issue over 185,000 patents, reduce the
              average processing time for inventions from the 1999 average
              of 10.9 months to an average of 10.0 months, and attain an 80
              percent favorable customer satisfaction rating.
       In 2001, PTO will register 151,000 trademarks, 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 favorable customer
              satisfaction rating.

       Commerce's National Institute of Standards and Technology (NIST):
    NIST works with industry to develop and apply technology, measurements,
    and standards to promote American competitveness. NIST administers the
    Manufacturing Extension Partnership (MEP), which makes technological
    information and expertise available to smaller manufacturers.
       In 2001, NIST laboratories will produce over 2,200 technical
              publications and offer 1,315 standard reference materials.
       In 2001, MEP will serve more than 33,600 clients, increase
              their sales by $678 million and generate $607 million in
              additional capital investment.

       Commerce's 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 2001, ITA will service over 159,000 small to medium sized
              businesses, an increase of over 3,000 from the level in 2000.

      Commerce's Bureau of Export Administration (BXA): The BXA is a
    regulatory agency that enforces U.S. export controls.
       In 2001, BXA will issue 12,000 licenses for dual use
              commodities (military or civilian use), 1,600 more than in
              1999.

    [[Page 217]]

       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 2001, the Census Bureau will complete the decennial census
              and deliver State apportionment totals to the President by
              December 31, 2000, and adjusted data for redistricting
              purposes and the distribution of nearly $200 billion in
              Federal funds to States and localities by March 31, 2001.
       BEA and Census will develop new methods to measure the
              significant structural changes in the economy introduced by
              rapidly growing E-business activity.

       Small Business Administration (SBA): SBA assists and promotes small
    business by expanding access to capital through guaranteed private
    sector loans -- SBA guaranteed over $11.5 billion in small business
    loans in 1999 -- that carry longer terms and lower interest rates than
    those for which small businesses would otherwise qualify. SBA also
    provides technical assistance and venture capital.
       A key component of the Administration's economic development
              strategy is to increase access to capital and credit for women
              and minorities owned firms. The Administration's programs will
              increase the number of small business loans to women owned
              firms from 13,500 in 1995 to 18,500 in 2001 and the number of
              loans to minority owned firms from 10,000 in 1995 to 13,750 in
              2001.
       Complementing loan programs are technical assistance
              programs, which increase the borrower's probability of
              success. To date, SBA has not experienced any defaults on the
              direct microloan program, suggesting that the technical
              assistance has had a positive impact. The Administration
              intends to increase the number of small businesses receiving
              counseling and training to 1.2 million, a four-percent
              increase over the estimated 2000 level and an increase of
              300,000 since 1993.

       Federal Trade Commission (FTC): The FTC enforces various consumer
    protection and antitrust laws that prohibit fraud, deception, anti-
    competitive mergers, and other unfair and anti-competitive business
    practices in the marketplace.
       In 2001, the FTC will save consumers $250 million by stopping
              fraud and other unfair practices, and another $500 million by
              stopping anti-competitive behavior.

      Federal Communications Commission (FCC):  The FCC works to encourage a
    fully competitive market place in communications and to promote and
    support every American's access to current and future communications
    services. Through introduction of more efficient licensing the FCC will
    ensure a more rapid introduction of new services and technologies.
    Through policy, economic analysis, and the rulemaking process, the FCC
    promotes competition in the public interest. The FCC ensures efficient
    spectrum management; enforces commission rules, regulations and
    authorities; and promotes consumer information and awareness of
    communications options and providers through the dissemination of
    Commission decisions and actions so that all Americans have access to
    communication services domestically and worldwide.
       In 2001, the FCC will achieve 85 percent of licensing and
              enforcement 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 $42 billion in 2001 and $222 billion over five years. In
    addition, the law does not tax gains on inherited capital assets that
    accrue during the lifetime of the original owner. This will cost $153
    billion from 2001 to 2005. 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

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    tax-exempt organizations also enjoy tax preferences. Tax benefits for
    other kinds of businesses are described in other chapters in this
    section.

     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
    failed 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 year 2000, the FDIC will perform 2,788 safety and
              soundness examinations.
      The NCUA will reduce the percentage of federally insured
              credit unions with net capital of less than six percent of
              assets to three percent of operating credit unions.

      Securities and Exchange Commission (SEC) and Commodity Futures Trading
    Commission (CFTC):  SEC regulates U.S. capital markets and the
    securities industry and facilitates capital formation. The 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.