CRS Summarizes Housing Issues for Congress

Housing issues related to the recent turmoil in U.S. housing markets, as well as perennial issues related to the housing needs of low-income individuals and families, were prominent in the 111^th Congress and will likely remain so in the 112^th Congress. The recent recession that was, in part, both a cause and a result of issues in the housing finance system put legislation designed to address current foreclosures and prevent a future crisis on the congressional agenda. At the same time, the 111^th Congress faced questions about how best to meet the affordable housing needs of low-income and vulnerable populations, particularly as unemployment climbed and the economy worsened. While the recession ended well before the start of the 112^th Congress, housing markets in many parts of the country are still experiencing the effects of an economic downturn. The 112^th Congress may continue to consider legislation to shore up the housing market and to consider issues that were left unresolved at the end of the 111^th Congress.

This report summarizes housing issues that were considered in the 111^th Congress and may be considered in the 112^th Congress. The report divides issues into three main sections: "Housing Finance and Homeownership," "Housing for Low-Income Individuals and Families," and "Other Issues."

Within the realm of housing finance and homeownership, the 111^th Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act, P.L. 111-203). The Dodd-Frank Act included foreclosure prevention-related provisions and changes to mortgage origination standards and practices. Notably absent from the Dodd-Frank Act were changes to the way in which the Government Sponsored Enterprises (GSEs) -- Fannie Mae and Freddie Mac -- are structured and their role in the mortgage market. Discussions regarding reform of the GSEs are likely to continue into the 112^th Congress. The 111^th Congress also enacted tax provisions meant to bolster the housing market by providing a tax credit for first-time homebuyers. Changes to the tax system may also be considered in the 112^th Congress in response to a recommendation from the National Commission on Fiscal Responsibility and Reform to reevaluate tax benefits for homeowners.

Congress also enacted laws that made changes to existing programs that provide housing assistance to low-income individuals and families. The Homeless Assistance Grants, administered by the Department of Housing and Urban Development (HUD) were amended to give communities greater flexibility in providing housing and services to homeless individuals (P.L. 111-22). The programs that fund housing for low-income seniors and individuals with disabilities (Section 202 and Section 811, respectively) also were changed to allow greater integration of funding from non-HUD sources in housing developments (P.L. 111-372 and P.L. 111-374). The implementation of these laws may be of interest to the 112^th Congress. The 111^th Congress also considered legislation that was not ultimately enacted but may be part of the agenda in the 112^th Congress, including reform to HUD's largest assistance programs: public housing and the Section 8 Housing Choice Voucher program.

The 112^th Congress may also choose to exercise its oversight authority over the implementation of housing-related legislation enacted in prior Congresses, ranging from the mortgage-related provisions in the Housing and Economic Recovery Act of 2008 (P.L. 110-289) to funding for new programs in the American Recovery and Reinvestment Act (P.L. 111-5). Further, housing assistance programs may be reevaluated in response to concern about the budget deficit and interest in reducing funding for non-security domestic discretionary programs.

                               Contents

At the start of the 112^th Congress, the economy is no longer officially in recession. However, the economy and housing markets across the country are still feeling the effects of an economic downturn that featured the largest decline in output, consumption, and investment and the largest increase in unemployment of any post-World War II recession.¹ The downturn was, in part, both a cause and a result of issues in the housing finance system and troubles in housing markets. During the downturn, home prices declined rapidly and home foreclosures reached record-high levels.² Given the prominent role housing played in this economic crisis, housing policy issues were active in the last two Congresses and are likely to rise again in the 112^th Congress.

In response to concerns about the magnitude of the economic downturn, the 110^th Congress enacted a sweeping economic stabilization program (P.L. 110-343), including the $700 billion Troubled Asset Relief Program (TARP) that gave the government the authority to purchase or insure troubled assets owned by financial firms.³ The 110^th Congress also enacted a major housing law, the Housing and Economic Recovery Act (P.L. 110-289), which included the authority for the federal government to place the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, into conservatorship (authority that the government promptly exercised).⁴

Given the landscape of a troubled financial system and a troubled housing market, the 111^th Congress pursued an agenda of reforms to the U.S. financial system, including the housing finance system. The agenda also included legislation to support the fragile housing market and troubled homeowners. At the same time, the 111^th Congress faced perennial questions about how best to meet the affordable housing needs of low-income and vulnerable populations and whether to make changes to the programs that comprise today's federal affordable housing system, particularly in light of rising budget deficits. In pursuing this agenda, the 111^th Congress enacted a number of laws, ranging from reforming the mortgage origination process to reauthorizing federal homelessness assistance. In other areas, ranging from GSE reform to Section 8 voucher program reform, legislation was considered but not enacted before the end of the 111^th Congress.

The outstanding issues from the 111^th Congress -- ranging from reform of the U.S. housing finance system to reform of major housing assistance programs -- may be pursued by the 112^th Congress. The 112^th Congress may also choose to exercise its oversight authority over the implementation of the housing-related legislation enacted in prior Congresses. Finally, any efforts by the 112^th Congress to address the nation's high budget deficit may have implications for housing-related programs and activities.

This report provides a brief summary of major housing issues that were considered in the 111^th Congress and may be of interest to the 112^th Congress. It does not provide comprehensive coverage of the issues or closely track active legislation, but it includes references to related CRS products that offer more detailed information and analysis.

Housing Finance and Homeownership

At the time they were placed in conservatorship, the Department of the Treasury (Treasury) signed separate contracts with Fannie Mae and Freddie Mac to purchase new issues of senior preferred stock as needed to keep each GSE solvent. Since then, Treasury has purchased more than $150 billion in preferred stock, and separately, the Federal Reserve has purchased more than $1 trillion in GSE-issued mortgage-backed securities. These actions and the risk to the economy represented by the more than $5 trillion in combined mortgage guarantees of the three housing GSEs (the Federal Home Loan Bank System being the third) have meant increased congressional focus on how the GSEs are regulated and how they are operating.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act, P.L. 111203) required the Secretary of the Treasury to present recommendations for ending the conservatorship of Fannie Mae and Freddie Mac by January 31, 2011. Following the release of this report, and as a part of considering how to end conservatorship, Congress may wish to consider what role the GSEs should play in the future of the U.S. housing finance system.

For additional information, see CRS Report R40800, Options To Restructure Fannie Mae and Freddie Mac, by N. Eric Weiss; CRS Report RL34661, Fannie Mae's and Freddie Mac's Financial Problems, by N. Eric Weiss; and CRS Report R41432, Mortgage Markets in Selected Developed Countries, by N. Eric Weiss.

The 111^th Congress enacted a number of laws that included provisions related to foreclosure mitigation. Some of these provisions amended existing foreclosure prevention programs, provided additional funding to such programs, or created new programs, while other provisions attempted to make it easier to modify mortgages or to address the effects of foreclosure. For example, the 111^th Congress enacted the Helping Families Save Their Homes Act (P.L. 111-22), which, among other things, established protections for renters living in foreclosed properties, established a safe harbor for mortgage servicers that perform mortgage modifications that meet certain specifications, and made changes to the Hope for Homeowners program, which had been established by the 110^th Congress. The 111^th Congress also enacted a number of foreclosure-related provisions in the Dodd-Frank Act (P.L. 111-203), including establishing a program to help homeowners who are having trouble paying their mortgages due to unemployment and making changes to the Home Affordable Modification Program (HAMP), which was created by the Obama Administration using authority granted in the Emergency Economic Stabilization Act of 2008 (P.L. 110-343). Dodd-Frank also authorized funding for legal assistance for people facing foreclosure, but no funding had been appropriated for this purpose by the end of the 111^th Congress.

The 111^th Congress also provided additional funding for two other programs that had been established during the 110^th Congress: the National Foreclosure Mitigation Counseling Program (NFMCP), which received appropriations in both the FY2009 and FY2010 Housing and Urban Development (HUD) appropriations acts, and the Neighborhood Stabilization Program (NSP), which received additional funding in both the American Recovery and Reinvestment Act (ARRA, P.L. 111-5) and Dodd-Frank, both of which also included certain requirements for how the additional NSP funding could be used. (The NSP is discussed in further detail later in this report.) In addition, the 111^th Congress considered a number of foreclosure-related initiatives that it did not enact, such as proposals to reform the bankruptcy code to allow judges to write down principal balances on primary residences.

The 112^th Congress may continue to consider a number of options related to foreclosures, particularly if foreclosure rates remain high. These may include considering changes to or the elimination of existing programs or the establishment of new programs or initiatives to supplement or replace existing programs.

For additional information, see CRS Report R40210, Preserving Homeownership: Foreclosure Prevention Initiatives, by Katie Jones; CRS Report RL34301, The Primary Residence Exception: Legislative Proposals in the 111^th Congress to Amend the Bankruptcy Code to Allow the Strip Down of Certain Home Mortgages, by David H. Carpenter; and CRS Report RS22919, Community Development Block Grants: Neighborhood Stabilization Program; Assistance to Communities Affected by Foreclosures, by Eugene Boyd and Oscar R. Gonzales.

The 111^th Congress included a number of changes to mortgage origination standards and practices in its comprehensive financial reform legislation, the Dodd-Frank Act (P.L. 111-203). Among other actions, Dodd-Frank amended the Truth in Lending Act to set minimum standards for certain residential mortgages, restricted the use of prepayment penalties, imposed certain requirements and limitations on high-cost mortgages, and directed the Federal Reserve to issue regulations prohibiting mortgage originators from "steering" consumers to certain types of mortgages and prohibiting any practices related to residential mortgage lending that it deems to be "abusive, unfair, deceptive, [or] predatory." The legislation also placed some limits on the ways in which mortgage originators may be compensated and required increased disclosures to consumers on a range of topics.

For additional information, see CRS Report R41350, The Dodd-Frank Wall Street Reform and Consumer Protection Act: Issues and Summary, coordinated by Baird Webel.

These procedural defects have the potential to undermine the legitimacy of the foreclosure process and could result in judicial sanctions, civil penalties, and even criminal prosecutions. The servicers in question do not believe they have wrongfully foreclosed or evicted anyone, but rather that some of the paperwork that must be filed to complete a foreclosure in certain states may not have been properly reviewed or notarized by their employees. Whether or not homes have been wrongfully foreclosed is unknown at this time. It is also unclear whether the procedural problems masked substantive problems, such as a failure to properly transfer interests in a mortgage, thus calling into question true ownership of mortgages in certain instances. Even if substantive problems do exist, it may be possible to rectify deficiencies in many, if not the vast majority of, cases to allow for the completion of foreclosures. Correcting these problems would come at a cost by potentially causing significant delays in the completion of the foreclosure process.

Many of the same documentation and proper transfer of ownership problems that may affect homeowners directly through the foreclosure process have the potential to cause even more significant legal and economic problems for the financial institutions involved. These problems include violations of securities laws for failing to accurately describe the mortgages underlying mortgage-backed securities (MBS) and violations of representations and warranties (e.g., regarding the quality of underwriting standards and other mortgage characteristics) provided for in the contracts that executed the sale of mortgage interests in the secondary market. These problems have the potential to cost financial institutions billions of dollars in legal claims while also increasing market uncertainty, which comes with its own costs.⁷

These issues were the focus of several hearings in the 111^th Congress,⁸ during which several Members of Congress expressed concern that legal challenges to foreclosures and unresolved legal disputes regarding mortgages among financial institutions could delay recovery in the housing market and may create systemic risk to the financial system. These potential risks could lead Congress to consider policy changes designed to encourage servicers and mortgage holders to engage in large-scale loan modifications or make other policy changes designed to resolve outstanding legal disputes.

For additional information, see CRS Report R41491, "Robo-Signing" and Other Alleged Documentation Problems in Judicial and Nonjudicial Foreclosure Processes, by David H. Carpenter.

Moving forward, it appears that the 112^th Congress may address the growing concern about the size and sustainability of the United States' recent budget deficits and the country's long-term budget outlook. This concern has brought the issues of the government's revenue needs and fundamental tax reform to the forefront of the congressional debates. One place Congress may choose to turn to address these issues is the set of tax benefits for homeowners. Reducing, modifying, or eliminating all or some of the current tax benefits for homeowners could raise a substantial amount of revenue while simultaneously simplifying the tax code, increasing equity among taxpayers, and promoting economic efficiency.

The National Commission on Fiscal Responsibility and Reform released a report in December 2010 that offers recommendations for improving the country's fiscal condition.⁹ One option would eliminate all tax benefits for homeowners. Another option would limit the mortgage interest deduction to exclude mortgages over $500,000, second residences, and home equity loans. It is unclear at this point if the 112^th Congress will adopt any of the commission's recommendations. Some have argued that the housing market is still too weak to start scaling back homeowner tax benefits. Others have suggested that a gradual reduction over time of the available tax benefits would give the market time to adjust and reduce uncertainty among current and potential homeowners.

For more information on the homebuyer tax credit, see CRS Report R40955, An Economic Analysis of the Homebuyer Tax Credit, by Mark P. Keightley; and for more information on the mortgage interest deduction, see CRS Report R41596, Select Tax Benefits for Homeowners: Analysis and Options, by Mark P. Keightley.

In the housing boom of the mid-2000s, FHA's share of the mortgage market fell to under 2% of mortgage originations (as measured by dollar volume) at the end of 2006. After housing prices began to decline, however, FHA began playing a larger role in the mortgage market as lenders tightened their underwriting criteria and FHA-insured loans became the mortgage of choice for an increasing number of homebuyers. During FY2010, FHA guaranteed nearly 40% of home-purchase mortgages made during the year and served more than 1.1 million homebuyers. This was the second time that FHA has assisted more than 1 million homebuyers in a single year (the first was 1987). At the same time that FHA's market share has been increasing, FHA has been facing increased mortgage defaults in recent years along with most other mortgage market participants. FHA therefore faces an increased tension between supporting the mortgage market by insuring new home loans and ensuring that it protects the stability of its insurance fund, the Mutual Mortgage Insurance Fund (MMIF). One indicator of the financial health of the MMIF, the capital reserve ratio, fell to 0.53% in FY2009, which is below a required level of 2% mandated in statute. (The capital ratio measures the amount of capital that FHA has on hand as a percentage of its insurance obligations, above and beyond the amount of capital set aside to cover expected losses on its current mortgage portfolio.) The capital reserve ratio increased modestly, to 0.59%, in FY2010, but remains below the mandated level of 2%. Furthermore, these levels do not include the Home Equity Conversion Mortgages (HECMs), which were added to the MMIF in FY2009. The FY2010 capital ratio for HECMs is -0.98%, and it brings the capital ratio for the MMIF to 0.50%.

One option for bringing more income to the MMIF and helping to raise the capital ratio would be to raise the upfront and annual insurance premiums that borrowers pay when obtaining FHA-insured loans. FHA announced that it intended to administratively raise the upfront premiums it charges, which were set below the maximum level allowed by statute, but because it had already been charging the maximum annual mortgage insurance premium allowed by law, it could not raise these annual premiums without congressional action. The 111^th Congress enacted P.L. 111229, which raised the maximum annual insurance premium and gave FHA the flexibility to increase these premiums along with the upfront premiums. The 111^th Congress also considered broader FHA reforms, and one bill, the FHA Reform Act of 2010 (H.R. 5072), passed the House but was not considered on the floor of the Senate.

Since 2008, the maximum mortgage amounts for FHA-insured loans have been at temporarily increased levels. Some have argued that these limits should be decreased in order to limit FHA's involvement in the mortgage market to smaller-sized loans, but others have argued that reducing the limits before the market stabilizes could lead to a further softening in the market by reducing the amount of available credit. The 111^th Congress acted to keep the maximum mortgage limits at their increased levels through FY2011. This is an issue that will be revisited in the 112^th Congress when the temporary mortgage limits approach their expiration. The 112^th Congress may also consider additional FHA reform proposals in order to protect the insurance fund or to attempt to decrease FHA's market share compared to non-FHA loans.

For additional information, see CRS Report RS20530, FHA-Insured Home Loans: An Overview, by Bruce E. Foote and Katie Jones; and CRS Report R40937, The Federal Housing Administration (FHA) and Risky Lending, by Darryl E. Getter.

Housing for Low-Income Individuals and Families

For additional information, see CRS Report R41233, The Department of Housing and Urban Development (HUD): FY2011 Appropriations, coordinated by Maggie McCarty.

Recent reform bills have proposed changes to the income eligibility and rent determination process, designed to make it less complicated, and changes to the physical inspection process to give PHAs more options for reducing the frequency of inspections and increasing sanctions for failed inspections. Proposed legislation has also included changes to the formula by which voucher funding is allocated to PHAs. In recent years, annual appropriations laws have specified different formulas for allocating voucher funding; voucher reform legislation has sought to codify a permanent formula (although, even if enacted it could still be overridden in the appropriations acts). Finally, recent Section 8 voucher reform proposals have included modifications to and expansions of the Moving to Work demonstration, which permits a selected group of PHAs to seek waivers of most federal rules and regulations governing the Section 8 voucher program and the public housing program. The most recent voucher reform bill, the Section 8 Voucher Reform Act of 2009 (H.R. 3045), was reported out of the House Financial Services Committee, but was not considered on the House floor before the end of the 111^th Congress. Section 8 voucher reform has been considered in each of the past several Congresses and may be considered again by the 112^th Congress.

For additional information, see CRS Report RL34002, Section 8 Housing Choice Voucher Program: Issues and Reform Proposals, by Maggie McCarty; and CRS Report RL32284, An Overview of the Section 8 Housing Programs: Housing Choice Vouchers and Project-Based Rental Assistance, by Maggie McCarty.

The Obama Administration's first budget requested funding and authority for a Transforming Rental Assistance initiative. Draft legislation to enact the initiative, called Preserving, Enhancing, and Transforming Rental Assistance (PETRA), was also released by the Administration. PETRA would create a new form of rental assistance and allow PHAs to convert their public housing contracts to these new rental assistance contracts. The rental assistance contracts would, presumably, pay higher subsidies than the PHA was receiving from its public housing operating funding. Further, by negating the old public housing contract, the property would no longer be encumbered by rules prohibiting the properties from being mortgaged. The proposal met with resistance from low-income housing advocates, who argued that it could result in the privatization of public housing, particularly if PHAs defaulted on the loans secured by their public housing properties.

The House Financial Services Committee reported a different public housing reform bill: H.R. 5814, the Public Housing Reinvestment and Tenant Protection Act of 2010. Rather than converting public housing to a new form of assistance, the bill would have authorized the Secretary of HUD to guarantee notes or other obligations issued by public housing agencies to finance the rehabilitation of public housing units. The bill was not enacted before the end of the 111^th Congress. Some version of PETRA, or other public housing reform, may be considered in the 112^th Congress.

The issue of veterans experiencing homelessness has gained prominence in recent years, and this will likely continue in the 112^th Congress. While little legislation to assist homeless veterans was enacted during the 111^th Congress, a number of bills were introduced and considered. Congress also continued to support housing for homeless veterans by allocating $75 million per year from FY2008 through FY2010 for Section 8 vouchers for homeless veterans; the House-passed HUD appropriations bill for FY2011 (H.R. 5850) also contained $75 million for additional vouchers. In addition, the Department of Veterans Affairs (VA) announced a plan to end veteran homelessness, resulting in additional funds being devoted to VA programs.

For additional information, see CRS Report RL30442, Homelessness: Targeted Federal Programs and Recent Legislation, coordinated by Libby Perl; and CRS Report RL34024, Veterans and Homelessness, by Libby Perl.

In the 111^th Congress, the Section 202 Supportive Housing for the Elderly Act (P.L. 111-372) removed one of the impediments to the ability of owners of older Section 202 developments to refinance and make improvements to their properties. Under previous law, owners could only refinance into loans with lower interest rates and reduced debt service -- the oldest Section 202 developments (those funded prior to 1974) were financed with low interest rate loans (approximately 3%), and it was difficult, if not impossible, to enter into a new loan with a lower interest rate and reduced debt service. These owners can now refinance as long as they address the physical needs of the property. In addition to P.L. 111-372's refinancing provisions, the new law authorizes "Senior Preservation Rental Assistance" for use in cases of refinancing, establishes a new category of housing with services within the Assisted Living Conversion Program called "Service Enriched Housing," and creates a National Senior Housing Clearinghouse to help eligible seniors find affordable housing. HUD will implement the new programs and changes to existing law during the 112^th Congress.

For additional information, see CRS Report RL33508, Section 202 and Other HUD Rental Housing Programs for Low-Income Elderly Residents, by Libby Perl.

Among the changes that P.L. 111-374 institutes are converting the source of funding for Section 811 tenant-based rental assistance to the Section 8 program; allowing Section 811 rental assistance to be used in conjunction with sources of financing other than Section 811 capital grants, including funds through the LIHTC and HOME program; decreasing the concentration of housing units for persons with disabilities by limiting the units in multifamily housing dedicated to persons with disabilities to 25% of the total (due to the need to finance the remaining 75% of units, this limitation could also encourage developers to use other funding sources to supplement the Section 811 funding); and delegating the processing of mixed finance developments to state housing finance agencies. In the 112^th Congress, HUD will implement changes to the Section 811 program, and the provisions in P.L. 111-374 regarding the funding of Section 811 tenant-based assistance may be implemented by the appropriations committees.

For additional information, see CRS Report RL34728, Section 811 and Other HUD Housing Programs for Persons with Disabilities, by Libby Perl.

The 111^th Congress considered several bills that would have provided an initial amount of funding to capitalize the Housing Trust Fund; however, none of these bills included an ongoing, dedicated funding source. Most of the bills considered by the 111^th Congress that would have provided an initial capitalization of the Housing Trust Fund would have appropriated an initial amount of $1 billion, and some would have provided an additional $65 million for rental assistance to be used in conjunction with Housing Trust Fund units. Two bills with initial funding for the Housing Trust Fund (H.R. 4213 and one version of H.R. 2847) were passed by the House. However, in both cases the funding for the Housing Trust Fund was not included in the enacted legislation. No funding for the Housing Trust Fund was provided by the end of the 111^th Congress.

For additional information, see CRS Report R40781, The Housing Trust Fund: Background and Issues, by Katie Jones.

A variety of circumstances may lead owners to stop participating in subsidized housing programs. In high-rent areas, owners may decide to pay off their assisted mortgages or choose not to renew affordability restrictions when mortgages mature or Section 8 rental-assistance contracts expire in order to convert a property to market-rate housing or sell the building at a profit. In cases where a property has been allowed to deteriorate significantly or the owner has violated federal program rules in other ways, HUD or the RHS may choose to end a contract with an owner. When the restrictions on these properties end, there is a risk that they will become unaffordable to low- and moderate-income tenants, and that those tenants will be displaced.

In the 111^th Congress, the Housing Preservation and Tenant Protection Act (H.R. 4868), which was approved by the House Financial Services Committee, attempted to address some of the issues involved in preserving HUD-subsidized housing. For properties with maturing mortgages, the bill would have made grants or loans available to rehabilitate properties if owners so chose, and it would have extended enhanced voucher protections to unassisted tenants upon mortgage maturation. The bill would also have created a "Preservation Exchange Program," through which HUD would have facilitated the transfer of a property with a maturing mortgage to a purchaser who would maintain the affordability. In addition, H.R. 4868 would have established a form of right of first refusal/right of first purchase for HUD (or its assignee) whereby HUD could match the offer of a third party and purchase a property in order to maintain its affordability. The bill also included provisions regarding the refinancing of Section 202 loans similar to those that were enacted in The Section 202 Supportive Housing for the Elderly Act (P.L. 111-372), described in the "Housing for the Elderly" section of this report.

Housing preservation has been a perennial issue since contracts between owners and HUD began to expire in the 1980s, and may be an issue again in the 112^th Congress.

For additional information, see CRS Report R41182, Preservation of HUD-Assisted Housing, by Maggie McCarty and Libby Perl.

To address the disruptions in the LIHTC market, ARRA (P.L. 111-5) created two programs: the Tax Credit Assistance Program (TCAP) and a temporary LIHTC-grant exchange program. Under the TCAP program, $2 billion in grants were provided for tax credit developments that were underway but were facing financial shortfalls because of low LIHTC prices. The exchange program, commonly referred to as the Section 1602 LIHTC-grant exchange program (after Section 1602 of ARRA), allowed states to exchange portions of their 2008 and 2009 LIHTC allocations for grants. The grants were then to be given to developers to ensure construction of affordable rental housing. In the 111^th Congress, several pieces of legislation that were at some point used as vehicles to extend expiring tax provisions contained a proposed one-year extension of the exchange. The grant exchange program, however, was not extended before the end of the 111^th Congress. Legislation to extend the exchange program may be considered in the 112^th Congress.

For additional information, see CRS Report RS22389, An Introduction to the Design of the Low-Income Housing Tax Credit, by Mark P. Keightley; and CRS Report RS22917, The Low-Income Housing Tax Credit Program: The Fixed Subsidy and Variable Rate, by Mark P. Keightley.

Other Issues

ARRA included several housing-related provisions. It provided just under $13.7 billion in discretionary appropriations for HUD, some through existing HUD accounts or programs and some for new programs. For example, ARRA provided $4 billion for public housing capital repairs, nearly double the amount the account had typically received in annual appropriations. It also provided $1.5 billion for a new Homeless Prevention and Rapid Rehousing Program, which allocated funds to states and local communities to be used for activities to prevent homelessness or to quickly find housing for those who have become homeless. This was the first time that significant HUD funding was devoted to preventing homelessness.

Some Members have raised concerns about the amount of funding that was provided under ARRA, the rate at which ARRA funds have been spent, and how the funds have been used. As of January 2011, HUD has obligated over 99% of its ARRA funding and about 60% of the funds had been disbursed.¹¹ Activities in the 112^th Congress may include monitoring or evaluating how ARRA funds, including housing-related ARRA funds, have been used and how programs have performed.

For more information about ARRA, see CRS Report R40537, American Recovery and Reinvestment Act of 2009 (P.L. 111-5): Summary and Legislative History, by Clinton T. Brass et al. For more information about the specific HUD funding provisions, see CRS Report RL34504, The Department of Housing and Urban Development: FY2009 Appropriations, by Maggie McCarty et al.

The NSP was first authorized with the passage of the Housing and Economic Recovery Act of 2008 (P.L. 110-289). Using the framework of the Community Development Block Grant (CDBG) program, Congress appropriated $3.92 billion to help 307 selected state and local governments acquire, rehabilitate, and resell abandoned and foreclosed properties. In 2009, Congress appropriated an additional $2 billion for NSP-2 activities when ARRA (P.L. 111-5) was enacted. ARRA revised key elements of the program as a result of a number of issues raised during the early implementation of NSP-1. Funds appropriated under ARRA for NSP-2 were awarded competitively and included nonprofit and for-profit entities as direct recipients of funds when teamed with a state or local government. In 2010, Congress appropriated an additional $1 billion for NSP-3 under the Dodd-Frank Act (P.L. 111-203). Each of the NSP rounds has specific deadlines that must be met with respect to the obligation and expenditure of funds. Under NSP-1, grantees had 18 months from the date HUD signed their grant agreements to obligate these funds and four years to expend allocations. Under NSP-2, recipients are required to spend at least half of the funds within two years and 100% within three years of their allocation date. Finally, no obligation deadline was established in legislation for NSP-3; however, 50% of funds must be expended within two years and 100% within three years.

It is unclear if the 112^th Congress will consider additional rounds of funding for NSP. However, Congress may consider conducting oversight hearings on the implementation of the NSP. Among the issues Congress may investigate are the timeliness of program implementation; issues affecting the acquisition and resale of foreclosed properties; differences in the treatment of for-profit developers and the assessment of developer fees; the status of HUD's NSP technical assistance efforts, including a review of best practices; and the interaction with other HUD programs.

For additional information, see CRS Report RS22919, Community Development Block Grants: Neighborhood Stabilization Program; Assistance to Communities Affected by Foreclosures, by Eugene Boyd and Oscar R. Gonzales.

The unprecedented experience of addressing hundreds of thousands of disaster victims following Hurricanes Katrina and Rita and subsequent Gulf Coast storms challenged the traditional administration of the program and provoked interest in new partnerships and approaches in administering the various forms of disaster-related housing assistance. A prominent change was FEMA's effort in developing a partnership with HUD to provide longer-term housing for displaced families. Using HUD's expertise and the resources provided by the President's Disaster Relief Fund (DRF), disaster victims have received housing and case management services for an extended period after disasters. As a result of its experience with Katrina, FEMA has limited its use of manufactured housing and created safety standards for those that are purchased for use, and is currently reviewing (in partnership with HUD) a pilot program for safer and more affordable temporary housing units. The review is expected to be completed in 2011.

For more information, see CRS Report R40810, FEMA Disaster Housing: From Sheltering to Permanent Housing, by Francis X. McCarthy.

Author Contact Information

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² Mortgage Bankers Association, "Delinquencies and Foreclosures Continue to Climb in Latest MBA National Delinquency Survey," press release, May 28, 2009, http://www.mortgagebankers.org/NewsandMedia/PressCenter/69031.htm.

³ CRS Report R41427, Troubled Asset Relief Program (TARP): Implementation and Status.

⁴ CRS Report RL34623, Housing and Economic Recovery Act of 2008, coordinated by N. Eric Weiss.

⁵ Federal Housing Finance Agency, "Statement of FHFA Director James B. Lockhart," press release, September 7, 2008, http://www.fhfa.gov/webfiles/23/FHFAStatement9708final.pdf.

⁶ CRS Report RS22950, Fannie Mae and Freddie Mac in Conservatorship, by Mark Jickling.

⁷ Ed Reardon, Abhisheck Mistry, John Sim, and Asif Sheikh, Putbacks and foreclosures: fact vs. fiction, J.P. Morgan Securitized Products Weekly; Laurie Goodman, Amherst Securities Group LP, Grais and Ellworth LLP hosted conference, Robosigners and Other Servicing Failures: Protecting the Rights of RMBS Investors, October 27, 2010, slide 10, available at http://video.remotecounsel.com/mediasite/Viewer/?peid=12e6411377a744b9a9f2eefd1093871c1d.

⁸ For example, U.S. Congress, House Committee on Financial Services, Subcommittee on Housing and Community Opportunity, Robo-Signing, Chain of Title, Loss Mitigation and Other Issues in Mortgage Servicing, 111^th Cong., 2^nd sess., November 18, 2010; U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, Subcommittee on Housing, Transportation and Community Development, Problems in Mortgage Servicing From Modification to Foreclosure, Part I, 111^th Cong., 2^nd sess., November 16, 2010; and U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, Subcommittee on Housing, Transportation and Community Development, Problems in Mortgage Servicing From Modification to Foreclosure, Part II, 111^th Cong., 2^nd sess., December 1, 2010.

⁹The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform, December 2010, http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf.

¹⁰ Congress did not enact final appropriations legislation before the start of FY2011. In order to continue to fund the government until final FY2011 appropriations are completed, Congress has enacted a series of continuing resolutions, which maintain funding at the FY2010 level.

¹¹ U.S. Department of Housing and Urban Development (HUD), Financial Activity Report, January 7, 2011, http://portal.hud.gov/hudportal/HUD?src=/recovery/transparency.