The Responsible GSE Affordable Housing Investment Act of 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, VELÁZQUEZ 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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