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Tuesday, November 30, 2010

Section 811 and Other HUD Housing Programs for Persons with Disabilities


Libby Perl
Specialist in Housing Policy

The ability of persons with disabilities to live independently in affordable, accessible housing became a prominent issue starting in 1999 as the result of a Supreme Court decision, Olmstead v. L.C. The court held that institutionalization of persons with mental disabilities in lieu of community-based care may constitute discrimination. Shortly after the Olmstead decision, on February 1, 2001, the President announced the New Freedom Initiative, an effort through multiple federal agencies to ensure full participation in society of persons with disabilities. Part of the New Freedom Initiative was Executive Order 13217, which implemented the Olmstead decision by ensuring (among other things) that all people with disabilities, not just those with mental illness, benefit from community-based treatment.

In order to ensure that persons with disabilities may live in community settings rather than in institutions, affordable and accessible housing is necessary. The Department of Housing and Urban Development (HUD) operates a number of programs that provide housing for persons with disabilities in various ways. The Section 811 Supportive Housing for Persons with Disabilities program provides capital grants and project rental assistance to nonprofit developers of housing targeted specifically to persons with disabilities. Prior to creation of Section 811, persons with disabilities lived together with elderly residents (defined by HUD as households with one or more adults age 62 or older) in developments funded through the Section 202 Supportive Housing for the Elderly program. The project-based Section 8 and Public Housing programs give project owners the option of dedicating facilities to elderly residents, residents with disabilities, or both populations together. Both the Section 811 and Section 8 programs set aside housing vouchers for persons with disabilities. And two HUD block grant programs—HOME and the Community Development Block Grant—may be used by states and communities to construct or rehabilitate housing for persons with disabilities.

In addition to these HUD programs, the Low Income Housing Tax Credit (LIHTC), administered by the Internal Revenue Service, may be used by states to target housing to special needs populations, including persons with disabilities. The LIHTC may be used in conjunction with HUD grants, including capital grants through the Section 811 program. The Housing and Economic Recovery Act of 2008 (P.L. 110-289) made it possible for developers of Section 811 housing to qualify for a higher tax credit rate, which could potentially make these mixed financing developments more feasible.

In the 111
th Congress, two similar bills to make changes to the Section 811 program, both called the Frank Melville Supportive Housing Investment Act, were introduced in the House (H.R. 1675) and Senate (S. 1481). On July 22, 2009, the House passed H.R. 1675 under suspension of the rules, and on September 30, 2010, the Senate Banking Committee ordered S. 1481 to be reported. Among the changes proposed by the two bills are turning over funding of Section 811 vouchers to the Section 8 program; creating a demonstration program in which Section 811 rental assistance would be used in conjunction with other sources of financing, including the LIHTC and HOME program; reducing the concentration of housing units for persons with disabilities by limiting the units in multifamily housing dedicated to persons with disabilities to 25% of the total; and delegating the processing of mixed finance developments to state housing finance agencies.


Date of Report: November 18, 2010
Number of Pages: 38
Order Number: RL34728
Price: $29.95

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Fannie Mae’s and Freddie Mac’s Financial Problems


N. Eric Weiss
Specialist in Financial Economics

The conservatorship of Fannie Mae and Freddie Mac raises questions about the impact of these government-sponsored enterprises (GSEs) on the housing and finance markets and their ability to return to financial viability. To date, the federal government has purchased more than $148 billion in stock in the two companies, with pending requests from Fannie Mae to purchase an additional $2.5 billion and from Freddie Mac for $100 million. Once these transactions are completed, the Treasury will hold $152.8 billion in senior preferred stock. Both companies are required under terms of the federal support to pay the government dividends of more than $15 billion annually (10% of the support). Housing, mortgage, and even general financial markets remain in an unprecedented situation.

Estimates of the total cost to the federal government use different baselines and vary widely. The Federal Housing Finance Agency (FHFA) estimates that Treasury is likely to purchase $221 billion-$363 billion of senior preferred stock by the end of 2013. The Congressional Budget Office estimates the budget cost for 2011-2020 to be between a loss of $44 billion and a profit of $53 billion. Standard & Poor’s has estimate the cost at $280 billion plus $405 billion to create a replacement system.

FHFA placed Fannie Mae and Freddie Mac into conservatorship after turmoil in the housing, mortgage, and financial markets raised doubts about the future of these enterprises, which are chartered by Congress as GSEs and whose debts are widely believed to be implicitly guaranteed by the federal government. The FHFA replaced the Office of Federal Housing Enterprise Oversight (OFHEO) as the GSEs’ safety and soundness regulator. OFHEO repeatedly assured investors that Fannie and Freddie had adequate capital, but as highly leveraged financial intermediaries, Fannie Mae and Freddie Mac had limited capital to cushion themselves against losses.

The Treasury agreed to buy mortgage-backed securities (MBSs) from the GSEs and to raise funds for them. Initially, each GSE gave Treasury $1 billion in senior preferred stock and warrants to acquire, at nominal cost, 80% of each GSE. Treasury responds to the GSEs request for additional funds for the third quarter of 2010, it will hold nearly $153 billion of preferred stock in the two GSEs. Treasury has agreed to invest whatever is required to maintain GSE solvency through calendar year 2012. Now the formerly implicit guarantee is nearly explicit.

In addition to Treasury’s purchases of senior preferred stock, the Federal Reserve (Fed) has purchased GSE bonds and MBSs. According to a November 9, 2010, FHFA report, together the Fed and Treasury have purchased $1,356.7 billion in MBSs; these purchase programs terminated at the end of the first quarter of 2010.



Date of Report: November 18, 2010
Number of Pages: 24
Order Number: RL34661
Price: $29.95

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The Dodd-Frank Wall Street Reform and Consumer Protection Act: Title IX, Investor Protection

Mark Jickling
Specialist in Financial Economics

Title IX of the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) contains 10 subtitles and 113 separate sections amending federal securities laws intended to improve investor protection. The range of Title IX’s provisions is very broad: some sections will bring significant changes to the securities business, while others are little more than technical clarifications of the Securities and Exchange Commission’s (SEC’s) authority. This report provides brief summaries of those provisions that create new SEC authority, that were controversial during the legislative process, or that appear likely to have far-reaching consequences.

Some of the most noteworthy sections of Title IX address issues viewed as central to the financial crisis that erupted in 2007. These include 
  • enhanced regulation of credit rating agencies, whose triple-A ratings of “toxic” mortgage-backed bonds set the stage for panic;
  • more stringent regulation of asset-backed securities, including a “skin in the game” requirement that issuers of such securities retain some of the risk; and 
  • a number of provisions relating to executive compensation, including authority to prohibit pay structures that create inappropriate risk in financial institutions. 
Another driving force behind Title IX was the Bernard Madoff Ponzi scheme, which repeated SEC examinations and investigations failed to detect. Many sections seek to improve the SEC’s performance, including 
  • creation of an Investor Advocate and Investor Advisory Committee within the SEC; 
  • establishment of a whistleblower program to produce tips about securities fraud;
  • various measures to improve SEC management, including a wide-ranging outside consultant study and various Government Accountability Office audits; and 
  • more budget flexibility and authorization for higher appropriations levels. 
Another group of provisions addresses the rights of investors and shareholders: 
  • the SEC may impose a fiduciary duty on broker-dealers who give investment advice, similar to the duty that already applies to investment advisers; 
  • municipal financial advisors must register with the SEC, and a majority of the Municipal Securities Rulemaking Board must be independent of the industry; and 
  • new disclosures and shareholder votes relating to executive compensation and corporate performance and governance, including SEC authority to allow certain shareholders to nominate candidates for the board of directors. 
Because of the diversity of these and other provisions, it is difficult to characterize the scope and thrust of Title IX in its entirety. Some observers, however, describe it as the most significant change to securities law since the enactment of the original federal statutes in the 1930s.


Date of Report: November 24, 2010
Number of Pages: 22
Order Number: R41503
Price: $29.95

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Monday, November 29, 2010

Unemployment Insurance: Available Unemployment Benefits and Legislative Activity

Katelin P. Isaacs
Analyst in Income Security

Julie M. Whittaker
Specialist in Income Security

Alison M. Shelton
Analyst in Income Security


Various benefits may be available to unemployed workers to provide income support. When eligible workers lose their jobs, the Unemployment Compensation (UC) program may provide up to 26 weeks of income support through the payment of regular UC benefits. Unemployment benefits may be extended for up to 53 weeks by the temporarily authorized Emergency Unemployment Compensation (EUC08) program and extended for up to a further 13 or 20 weeks by the permanent Extended Benefit (EB) program under certain state economic conditions. Certain groups of workers who lose their jobs because of international competition may qualify for income support through Trade Adjustment Act (TAA) programs. Unemployed workers may be eligible to receive Disaster Unemployment Assistance (DUA) benefits if they are not eligible for regular UC and if their unemployment may be directly attributed to a declared major disaster.

The authorization for the EUC08 program expires on November 30, 2010. Those beneficiaries receiving tier I, II, III, or IV EUC08 benefits before November 27, 2010, are “grandfathered” for their remaining weeks of eligibility for that particular tier only. There will be no new entrants into any tier of the EUC08 program after November 27, 2010. See the section in this report on “Policy Proposals that Target Unemployment Benefit Exhaustees” for additional measures to address the needs of the long-term unemployed.

The American Recovery and Reinvestment Act of 2009 (ARRA), P.L. 111-5, contained several provisions affecting unemployment benefits. ARRA temporarily increased benefits by $25 per week (Federal Additional Compensation, or FAC); extended the EUC08 program through 2009; temporarily provided for 100% federal financing of EB; and allowed states the option of temporarily easing EB eligibility requirements. ARRA also suspended income taxation on the first $2,400 of unemployment benefits received in 2009. In addition, states do not owe or accrue interest, through December 2010, on federal loans to states for the payment of unemployment benefits. ARRA also provided for a special transfer of up to $7 billion in federal monies to state unemployment programs as “incentive payments” for changing certain state UC laws as well as transferred $500 million to the states for administering unemployment programs. P.L. 111-92 expanded the number of weeks available in the EUC08 program through the creation of two additional tiers. P.L. 111-118 and P.L. 111-144 extended the EUC08 program, 100% federal financing of EB, and the FAC through the end of February 2010 and April 5, 2010, respectively. P.L. 111-157 extended these three UC provisions through the week ending on or before June 2, 2010.

On July 22, 2010, the President signed P.L. 111-205, the Unemployment Compensation Extension Act of 2010, into law. P.L. 111-205 extends the availability of EUC08 and 100% federal financing of EB until November 30, 2010. P.L. 111-205 does not, however, extend the authorization for the $25 FAC benefit, which expired on May 29, 2010 (May 30, 2010, in New York state).



Date of Report: November 18, 2010
Number of Pages: 39
Order Number: RL33362
Price: $29.95

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Social Security Reform: Current Issues and Legislation


Dawn Nuschler
Specialist in Income Security

Social Security reform has been an issue of political debate in recent years. Currently, there is renewed congressional interest in reform in part due to the National Commission on Fiscal Responsibility and Reform established by President Obama in February 2010, which has been tasked with making recommendations on ways to improve the long-term fiscal outlook. In November 2010, the co-chairs of the fiscal commission released a draft proposal that includes a number of changes to the Social Security program. The full 18-member commission is expected to release its final report on December 1, 2010.

The spectrum of ideas for reform ranges from relatively minor changes to the pay-as-you-go social insurance system enacted in the 1930s to a redesigned, “modernized” program based on personal savings and investments modeled after IRAs and 401(k)s. Proponents of the fundamentally different approaches to reform cite varying policy objectives that go beyond simply restoring long-term financial stability to the Social Security system. They cite objectives that focus on improving the adequacy and equity of benefits, as well as those that reflect different philosophical views about the role of the Social Security program and the federal government in providing retirement income. However, the system’s projected long-range financial outlook provides a backdrop for much of the Social Security reform debate in terms of the timing and degree of recommended program changes.

The Social Security Board of Trustees projects that the trust fund will be exhausted in 2037 and that an estimated 78% of scheduled annual benefits will be payable with incoming receipts at that time (under the intermediate projections). The primary reason is demographics. Between 2010 and 2030, the number of people aged 65 and older is projected to increase by 76%, while the number of workers supporting the system is projected to increase by 8%. In addition, the trustees project that the system will run cash flow deficits in 2010 and 2011, and again in 2015 and each year thereafter through the end of the 75-year projection period. When current Social Security tax revenues are insufficient to pay benefits and administrative costs, federal securities held by the trust fund are redeemed and Treasury makes up the difference with other receipts. When there are no surplus governmental receipts, policymakers have three options: raise taxes or other income, reduce other spending, or borrow from the public (or a combination of these options).

Public opinion polls show that less than 50% of respondents are confident that Social Security can meet its long-term commitments. There is also a public perception that Social Security may not be as good a value for future retirees. These concerns, and a belief that the nation must increase national savings, have led to proposals to redesign the system. At the same time, others suggest that the system’s financial outlook is not a “crisis” in need of immediate action. Supporters of the current program structure point out that the trust fund is projected to have a positive balance until 2037 and that the program continues to have public support and could be affected adversely by the risk associated with some of the reform ideas. They contend that only modest changes are needed to restore long-range solvency to the Social Security system.

During the 110
th Congress, six Social Security reform measures were introduced, five of which would have established individual accounts. None of the measures received congressional action. During the 111th Congress, four Social Security reform measures have been introduced.


Date of Report: November 17, 2010
Number of Pages: 35
Order Number: RL33544
Price: $29.95

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