No Hope for Fannie, Freddie Shareholders

Fannie Mae (FNM Quote) and Freddie Mac (FRE Quote) shareholders were wiped out after a federal government takeover last month, but that hasn't stopped lawmakers from skimming profits from the mortgage giants to fund possibly redundant housing programs.

The main aim of the housing bill passed by both houses of Congress in July was to reform oversight of Fannie and Freddie. But it also slipped in some pet projects for lawmakers, including the Housing Trust Fund, advocated since 2005 by Rep. Barney Frank (D., Mass.). The program calls on Fannie and Freddie to provide grants in support of affordable housing issues.

The legislation directs 5% of the profits from any new business at Fannie and Freddie to the fund. The bill also called for 4.2 basis points of that sum to be directed to a new program called Hope for Homeowners, which will be meant to provide aid to homeowners facing foreclosure.

But the world has changed since the program was created, raising questions about whether it should exist at all. In September, Fannie and Freddie were seized by the federal government and placed in conservatorship, cutting their dividends and wiping out shareholders of the two companies. Moreover, it seemed to some long-time critics that the program was redundant.

"Why put a tax on the GSEs to make homes more affordable when that was their mission anyway?" asked Leslie Paige of Citizen's Against Taxpayer Waste.

Steve Adamske, a spokesman for Frank, defended the fund and the Hope for Homeowners program, saying they are consistent with the GSEs' mission to encourage home ownership. And despite the existence of other government programs to aid troubled borrowers, Hope for Homeowners fills certain gaps in coverage.