Legislation that could result in three times the amount of affordable housing currently being built has been introduced in the House by Vermont's lesser-known Independent lawmaker and 39 of his colleagues.

The bill by Rep. Bernie Sanders, a senior member of the Housing Subcommittee, would create a National Affordable Housing Trust Fund that would be capitalized by using some of the profits generated by the Federal Housing Administration's mortgage insurance fund.

Estimates are that the fund will generate a $26 billion surplus over the next seven years.

There is no question that affordable housing is a serious national problem. According to the Department of Housing and Urban Development, something on the order of 5.4 million Americans are now paying more than half their incomes on housing or are living in substandard dwellings. And since 1990, the number of families who fit into this "worst case" scenario has increased by 12 percent.

"The crisis must be addressed," said Rep. Sanders. "For these families living paycheck to paycheck, one unforeseen circumstance a sick child, a needed car repair or a large utility bill can send them into homelessness."

Under the proposal, excess revenue generated by the Federal Housing Administration and the Government National Mortgage Association would be transferred to the trust fund, which would be administered by the Treasury Department. Ginnie Mae earns money by packaging FHA-insured loans into securities and selling them to investors.

The FHA is currently required to retain a 2 percent capital reserve to guard against an unexpected rash of foreclosure which the agency would have to cover. Even though the insurance fee charged FHA borrowers at closing was lowered in January from 2.25 percent of the loan amount to 1.5 percent, projections are that the current reserve is about 4 percent, roughly twice what is necessary.

The FHA insures about 1 million new mortgages a year with a total loan principal of about $100 billion. The Congressional Budget Office estimates that the average profit per loan is just over 2 percent of the principal. Consequently, profits total more than $2 billion annually. And with about $1 billion in investment income, the fund is project to grow by some $3 billion a year for the next few years.

Under the legislation, part of this surplus would be used to stock a trust fund, which would then distribute it as matching grants to states based on their particular needs. The states would be required to match 25 percent of the federal grant with their own funds.

Also, states would be required to use 75 percent of the money to build rental housing and low-income households in mixed-income developments which must remain affordable for 40 years. The remaining 25 percent may be used to build other rental housing or for owner-occupied dwellings.

In this way, Rep. Sanders and his supporters believe that as many as 200,000 families annually will be provided with safe, decent and affordable shelter.

"Over recent years, Congress has said that money that is put into the Highway Trust Fund should be used for highways, money put into the Social Security Trust Fund can only be used for Social Security, and money put into the Airway Trust Fund should be used for aviation needs," the Vermont lawmaker said. "It is now time for Congress to at the very least use a portion of the Federal Administration surplus to address the affordable housing crisis."

Sen. John Kerry, D-Mass., and 16 others are expected to introduce a similar bill in the Senate after the Fourth of July recess.

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