[Congressional Record (Bound Edition), Volume 160 (2014), Part 7]
[Extensions of Remarks]
[Page 9349]
[From the U.S. Government Publishing Office, www.gpo.gov]




 INTRODUCTION OF RESPONSIBLE GSE AFFORDABLE HOUSING INVESTMENT ACT OF 
                                  2014

                                  _____
                                 

                        HON. CAROLYN B. MALONEY

                              of new york

                    in the house of representatives

                          Friday, May 30, 2014

  Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I rise today to 
introduce the Responsible GSE Affordable Housing Investment Act of 
2014.
  This bill would take away an incentive for the Government Sponsored 
Enterprises (GSEs)--Fannie Mae and Freddie Mac--to make investments 
that would lead to a decrease in affordable multifamily housing units. 
In particular, the bill would curtail Fannie and Freddie's ability 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, the GSEs 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. 
The GSEs, in turn, make decisions about their investments based on 
whether these investments would be eligible for such housing goals 
credit.
  In 2007, Fannie Mae and Freddie Mac invested in a $22 billion 
commercial mortgage-backed securities (CMBS) transaction that contained 
the debt on the Stuyvesant Town/Peter Cooper Village project. The deal 
was one of the largest 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.
  Mr. 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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