[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]
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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)
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Estimate
Function 370 1999 -----------------------------------------------------------
Actual 2000 2001 2002 2003 2004 2005
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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
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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)
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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 1999 guarantees as of the end of
written in 1999 1999
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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
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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
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Subtotal, SBA Loans................................ 13,946 45,663 41,180
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Total Assistance................................... 191,288 1,980,281 778,417
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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
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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
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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.
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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.