New management of GSEs says housing tax credits will not be dumped

Earlier I expressed concerns about the portfolios of Low Income Housing Tax Credits (LIHTC) held by Fannie Mae and Freddie Mac.  If the new government managers of the GSEs decided to dump tax credits it could have a disastrous effect on the ability of developers to sell future credits to build additional low income rental housing.

We were not the only ones who expressed concerns.

Today the government entity now managing the GSEs released a statement today stating, “We also do not expect either company to liquidate its portfolio of LIHTC or mortgage-revenue bonds.”

That’s good news for the near term.  The longer term future of the GSEs role in affordable housing will be up to Congress.

Here is the text of the statement…

For Immediate Release
September 12, 2008


FHFA has stated that business will continue as usual at the Enterprises during the conservatorship-this applies to both their single-family and multifamily businesses.

FHFA recognizes the importance of all aspects of the Enterprises’ multifamily businesses- including the LIHTC (low-income housing tax credit) area and liquidity facilities for remarketed mortgage revenue bonds – for a healthy secondary market and housing affordability. In particular, support for multifamily housing finance is central to the Enterprises’ public purpose.

FHFA’s September 7, 2008 Statement Regarding Contracts of Enterprises in Conservatorship (posted on applies equally to the single-family and multifamily businesses. It states that the conservatorship does not affect existing contracts, nor the authority of the Enterprises to enter into new contracts, nor their enforceability.

As conservator, FHFA expects each Enterprise to continue underwriting and financing sound multifamily business. We also do not expect either company to liquidate its portfolio of LIHTC or mortgage-revenue bonds.

FHFA will only intervene when there is a question of unsafe and unsound business practice that would have a negative impact on an Enterprise’s financial position and is outside of the normal course of business. Under these unusual circumstances, both Enterprises would first seek advice and guidance from FHFA before proceeding further as they deem appropriate.