Housing Advocates File Suit Against DeMarco, FHFA

Posted by Jodi Weinberger on July 15, 2013

Don't be fooled by the appearance in the media of a housing market in recovery, Rachel LaForest, executive director of Right to the City Alliance (RTTC), said on a press call July 9 announcing a lawsuit against the FHFA and its director Edward DeMarco.

The nonprofit, joined by the National Low Income Housing Coalition, filed a suit in a Miami federal court against DeMarco for failing to contribute over $382 million to the National Housing Trust Fund (NHTF).

The 2008 Housing and Economic Recovery Act created the Fund and mandated that Fannie and Freddie make contributions to it, but when the economy crashed, the requirement was temporarily suspended. The Trust Fund has remained empty so far.

Now that the GSEs are profitable again, housing advocates are demanding the agency pay up. The contributions are badly needed, as the fund is immune to discretionary cuts, unlike HUD programs and other aid that has been slashed with budget cuts and sequestration, said Sheila Crowley, NLIHC CEO.

The $382 million demanded by the plaintiffs is based on Fannie and Freddie's 2012 profits; Crowley said the GSEs have brought in even more in 2013.

If the lawsuit is successful, the money would be allocated to states to decide how to use. Some would do rehabilitation work, some would do preservation work and some would use it for new construction, Crowley said.

Millions of Americans are homeless. The problem is growing, not getting better. Crowley said she remembers being elated when HERA created the NHTF in 2008, after years of urging Congress to do so, and NLIHC will now lead the fight to make sure the funding mechanism is reinstated.

The trust fund would be another source of aid for those with very low incomes, such as Angela Samuels of Miami and Danielle Stelluto of New York, also plaintiffs in the suit.

Samuels was evicted from her home of 43 years due to mortgage predatory lending practices. The unemployed nurse bounces between staying with family and friends and is unable to take care of a niece and nephew that had been staying with her.

"The FHFA needs to step up for the countless people who have been taken advantage of and who have lost their home, people like me," Samuels said. "Obama administration, put your foot down."

In New York, Danielle Stelluto, a single mother to her 5-year-old son and 3-year-old daughter ended up in the shelter system in the Bronx after the Children's Advantage Voucher that helped her afford a three-bedroom home in Far Rockaway was cut from the New York budget.

Her job as a cashier at Stop & Shop did not provide sufficient income to cover the 1,300-per-month rent and she had to quit the job altogether once in the shelter to meet the curfew. Leaving Far Rockaway also meant she was "ripped apart" from her mother and brother and that her children were forced to leave their "comfort zones."

"I honestly have never been so stressed out in my life," Stelluto said. "I have depression, anxiety, and I feel like I'm running on a hamster wheel."

Section 8 housing aid is closed, Stelluto said, and NYCHA has a 10-year waiting list.

First they need to win, then RTTC and NLIHC would focus on making sure the funding stays in place if DeMarco is replaced by Rep. Mel Watt (D-N.C.), and even if Fannie and Freddie are also replaced.

"This is the initial source of funding that we need to get programs started," Crowley said. "It's by no means sufficient to meet the huge need that have described here."

(Photo by Michael Premo, CC BY-NC-ND.)

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