[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
                                                        --------------------------------------------------------
    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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   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.
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