WASHINGTON A lawsuit filed by low-income housing advocates designed to force the Federal Housing Finance Agency to provide money to a housing trust fund has been blocked by a U.S. district court judge.
The National Low Income Housing Coalition sued the agency for failing to fund the National Housing Trust Fund that was first authorized by Congress as part of the Housing Economic Recovery Act of 2008.
U.S. District Court judge Marcia Cooke of the Southern District of Florida dismissed case on the grounds that the housing coalition lacks standing to sue FHFA. She also ruled that the court lacks jurisdiction over decisions by the FHFA, which is the regulator and conservator of Fannie Mae and Freddie Mac.
Sheila Crowley, the president of the housing coalition, said she was disappointed by the ruling because the judge didn't rule on the core issue of the lawsuit providing money for the trust fund.
She noted that pundits are viewing the case in the same light as a lawsuit by a hedge fund that wants to ensure a portion of the government-sponsored enterprises' profits go to shareholders. A district court judge ruled Tuesday that the government had the power to claim nearly all of the GSEs' profits after they were seized in 2008.
While the rulings may be similar, "it is not the same thing," Crowley said.
Shortly after Congress passed HERA, FHFA placed Fannie and Freddie into conservatorship as mounting losses required the U.S. Treasury to step in and bail out the GSEs. Subsequently, the GSE regulator decided to suspend implementation of the housing trust fund which was intended to increase and preserve the supply of rental housing for low-income families.
The hedge funds are "unhappy because the profits are going to the U.S. Treasury," Crowley said. "We are unhappy that the requirement that Fannie and Freddie pay funds into the trust fund isn't happening."
The consumer group president also stressed that funding the trust is not supposed to be based on profits. "It is an assessment on their volume of business," she said. The lawmakers expected Fannie and Freddie to fund the trust out of gross revenues. It was viewed "as an expense of doing business."
FHFA Director Mel Watt has indicated he is reviewing the housing trust fund issue. The former congressman supported the GSE trust fund when the bill creating it was passed by Congress. Crowley said she is "hopeful" that Watt will eventually end the suspension and the GSEs will start making payments into the fund.