[Congressional Record Volume 156, Number 77 (Thursday, May 20, 2010)]
[Extensions of Remarks]
[Page E908]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     THE RESPONSIBLE GSE AFFORDABLE HOUSING INVESTMENT ACT OF 2010

                                 ______
                                 

                        HON. CAROLYN B. MALONEY

                              of new york

                    in the house of representatives

                         Thursday, May 20, 2010

  Mrs. MALONEY. Madam Speaker, I rise today to introduce the 
Responsible GSE Affordable Housing Investment Act of 2010. I would like 
to recognize my colleagues Representatives Nadler, Velazquez and Meeks 
for their co-sponsorship of the legislation.
  The bill will curtail the ability of Government Sponsored Enterprises 
(GSEs) such as Fannie Mae and Freddie Mac to invest in future deals--
like in the case of Stuyvesant Town/Peter Cooper Village in my 
district--that do not result in an increase in, or preservation of, 
affordable housing.
  Since 1992, GSEs like Fannie Mae and Freddie Mac have been required 
to meet certain affordable housing goals each year. ``Housing Goals 
Credit'' is awarded numerically based on the types of transactions that 
they enter into. GSEs in turn make decisions about their investments 
based on whether these investments would be eligible for Housing Goals 
Credit.
  In 2007, Fannie Mae and Freddie Mac invested in a $22 billion 
commercial mortgage-backed securities transaction that contained the 
debt on the Stuyvesant Town/Peter Cooper Village project. The deal was 
one of the largest commercial mortgage-back securities (CMBS) deals 
ever; Fannie Mae and Freddie Mac's participation as senior debt holders 
of $3 billion was critical.
  At the time of the deal it was clear that the Stuyvesant Town 
property was overleveraged--the debt on the property was larger than 
the rental income it was receiving. After the transaction closed, over 
the course of several years, the new owners of the property engaged in 
aggressive tactics to convert affordable units to market rate so that 
they could increase their rental income--yet the GSEs received 
affordable housing goals credit for this investment. The investment on 
the part of the GSEs secured completion of the deal and the GSEs were 
incentivized to make it because of the housing goals credit they 
received.
  The GSEs should be incentivized to invest in projects that actually 
do increase or preserve affordable housing. That is what my bill will 
do. It will require the Federal Housing Finance Agency to rewrite its 
rules for distributing housing goals credit so that Freddie and Fannie 
cannot receive credit for investments like the one they made in the 
Stuyvesant Town project. It would also require the GSEs to use the same 
underwriting standards for investments in the secondary market that 
they do for their direct investments which are much stricter. That way, 
the GSEs won't invest in the secondary market in projects where the 
rental income is insufficient to cover the payments on the debt on the 
property.
  Madam Speaker, this bill addresses a critical component of GSE 
decision-making when it comes to their investments: whether or not they 
will receive housing goals credit. It does not prohibit them from 
making investments, it merely says that if those investments do not 
lead to an increase or a preservation of affordable housing, the GSEs 
cannot receive credit for them.

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