The Housing Trust Fund: Background and Issues

Katie Jones
Analyst in Housing Policy

On July 30, 2008, President Bush signed into law the Housing and Economic Recovery Act of 2008 (P.L. 110-289), which included the establishment of a national Housing Trust Fund. In general, affordable housing trust funds provide dedicated, permanent sources of funding for affordable housing that do not require annual appropriations. Several states and many localities across the United States already have their own affordable housing trust funds, and for years affordable housing advocates had worked to get such a fund created on a national level. Opponents of a national affordable housing trust fund argued that it would be duplicative of other affordable housing programs.

The Housing Trust Fund created by P.L. 110-289 would provide formula-based grants to states to use for affordable housing activities. By statute, most of the funding would have to be used for rental housing; states could use up to 10% of their grants for homeownership activities. Furthermore, all of the funds would have to benefit very low- or extremely low-income households, with at least 75% of the funding for rental housing being used exclusively for the benefit of extremely low-income households.

P.L. 110-289 directed Fannie Mae and Freddie Mac to annually contribute a percentage of the dollar volume of mortgages that they purchased to the Housing Trust Fund as the fund’s dedicated funding source. However, the law also gave the director of the Federal Housing Finance Agency (FHFA), Fannie and Freddie’s regulator, the authority to suspend those contributions if he determined that they were contributing to financial trouble at the agencies. On September 7, 2008, Fannie and Freddie were placed in conservatorship, and in November 2008, the director of FHFA suspended their contributions to the Housing Trust Fund. The Fund had not yet received any funding at the time the contributions were suspended.

It is unclear whether contributions from Fannie Mae and Freddie Mac to the Housing Trust Fund will ever be reinstated. Advocates have begun searching for a new source of funds for the program. Several pieces of legislation have been introduced in the 112th Congress that include funding for the Housing Trust Fund, and similar legislation had been introduced in previous Congresses. However, no funding has been provided to the program as of the date of this report. Legislation has also been introduced in the 112th Congress that would eliminate the Housing Trust Fund entirely.


Date of Report: January 18, 2012
Number of Pages: 13
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Vulnerable Youth: Federal Mentoring Programs and Issues

Adrienne L. Fernandes-Alcantara
Specialist in Social Policy

Youth mentoring refers to a relationship between youth—particularly those most at risk of experiencing negative outcomes in adolescence and adulthood—and the adults who support and guide them. The origin of the modern youth mentoring concept is credited to the efforts of charity groups that formed during the Progressive era of the early 1900s to provide practical assistance to poor and juvenile justice-involved youth, including help with finding employment.

Approximately 2.5 million youth today are involved in formal mentoring relationships through Big Brothers Big Sisters (BBBS) of America and similar organizations. Contemporary mentoring programs seek to improve outcomes and reduce risks among vulnerable youth by providing positive role models who regularly meet with the youth in community or school settings. Some programs have broad youth development goals while others focus more narrowly on a particular outcome. Evaluations of the BBBS program and studies of other mentoring programs demonstrate an association between mentoring and some positive outcomes, but the effects of mentoring on particular outcomes and the ability for mentored youth to sustain gains over time is less certain.

The federal government provides funding for mentoring primarily through a grant program to the Department of Justice (DOJ), with annual appropriations for the program of about $80 million to $100 million in recent years. This funding is used for research and direct mentoring services to select populations of youth, such as those involved or at risk of being involved in the juvenile justice system. Separately, other DOJ funds are used to provide mentoring to Indian youth and youth who are reentering the community after being in a correctional facility. Other federal agencies provide or are authorized to support mentoring as one aspect of a larger program. For example, select programs carried out by the Corporation for National and Community Service (CNCS) can provide mentoring, among other services. Youth ChalleNGe, an educational and leadership program for at-risk youth administered by the Department of Defense (DOD), includes mentoring as an aspect of its program. Federal agencies also coordinate on federal mentoring issues. The Federal Mentoring Council serves as a clearinghouse on mentoring issues for the federal government.

In recent years, two mentoring programs—the Mentoring Children of Prisoners (MCP) program and Safe and Drug Free Schools (SDFS) Mentoring program—provided a significant source of federal funding for mentoring services. However, the programs were short-lived: funding for the MCP program was discontinued beginning in FY2011 and funding for the SDFS program was discontinued beginning in FY2010. The Mentoring Children of Prisoners program was created in response to the growing number of children under age 18 with at least one parent who is incarcerated in a federal or state correctional facility. The program was intended, in part, to reduce the chance that mentored youth would use drugs and skip school. Similarly, the SDFS Mentoring program provided school-based mentoring to reduce school dropout and improve relationships for youth at risk of educational failure and with other risk factors. As part of its FY2010 budget justifications, the Obama Administration had proposed eliminating the program because of an evaluation showing that it did not have an impact on students overall in terms of interpersonal relationships, academic outcomes, and delinquent behaviors.

Issues relevant to the federal role in mentoring include the limitations of research on outcomes for mentored youth, the potential need for additional mentors, grantees’ challenges in sustaining funding, and the possible discontinuation of federal mentoring funding.


Date of Report: January 12, 2012
Number of Pages: 44
Order Number: RL34306
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Child Welfare: Recent and Proposed Federal Funding

Emilie Stoltzfus
Specialist in Social Policy

Child welfare services and supports are intended to ensure and improve the safety, permanence, and well-being of children. Final FY2012 funding provided for the child welfare programs discussed in this report is $8.0 billion. This amount is roughly the same as the amounts proposed in FY2012 funding bills introduced or otherwise acted on in the House (H.R. 3070 and H.R. 2596) and the Senate (S. 1599 and S. 1572). It is above the $7.7 billion in final funding provided for these programs for FY2011 but lower than funding proposed for them as part of the President’s FY2012 budget ($8.3 billion).

Most child welfare programs are administered by the Children’s Bureau of the Administration for Children and Families (ACF), which is within the Department of Health and Human Services (HHS). Final FY2012 funding for these programs was included in P.L. 112-74 (Division F), enacted on December 23, 2011. A few child welfare programs are administered by the Office of Justice Programs at the Department of Justice (DOJ) and they received final FY2012 funding as part of P.L. 112-55 (Title II), enacted on November 18, 2011.

The primary reason for the increase in overall child welfare funding authority provided in FY2012 (as compared to FY2011) is the level of definite funding authority provided for the Title IV-E foster care, adoption assistance, and kinship guardianship assistance funding. That FY2012 level ($6.9 billion) is $384 million above the comparable level assumed for FY2011. Funding for the Title IV-E program is authorized on a mandatory and open-ended basis and, as it did this year, Congress typically provides the level of budget authority estimated by the Administration as necessary to meet all obligations under current law. For FY2012, Congress did not provide additional definite funding authority under Title IV-E that was sought by the President ($250 million for FY2012) to initiate a foster care reform proposal included in his FY2012 budget.

Apart from the Title IV-E program, the final FY2012 funding bill provides level or somewhat reduced funding for most child welfare programs discussed in this report when compared to FY2011 funding levels. This is similar but not identical to what the President sought in his FY2012 budget. The final FY2012 funding legislation reduced overall capped mandatory funding for child welfare programs by $26 million, which includes a $20 million (4.7%) reduction in overall funding for the Promoting Safe and Stable Families program. Additionally, no funding was provided to support continuation of the National Survey of Child and Adolescent Well-Being (NSCAW), which received capped mandatory funding of $6 million in FY2011. The President’s budget sought to maintain FY2011 funding levels in both of those instances.

Finally, the FY2012 funding legislation reduced overall discretionary funding for child welfare programs by $11 million. For most programs, the reduced funding resulted from an across-theboard reduction applied to all HHS programs receiving discretionary funding (and meant that their final FY2012 funding levels equal roughly 99.8% of what they received in the last fiscal year). However, for a few discretionary programs (e.g., Court Appointed Special Advocates, CASA), the cuts were larger.

This report compares final FY2012 child welfare program levels to the budget request made for those programs in the President’ s FY2012 budget proposal and the final funding provided for those programs in FY2011. Table 1 in this report shows the share of dedicated child welfare funding provided by general category for recent years, including final funding for FY2010- FY2012. Table 2 includes recent and proposed funding levels by child welfare program.


Date of Report: January 13, 2012
Number of Pages: 25
Order Number: RL34121
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Deflation: Economic Significance, Current Risk, and Policy Responses

Craig K. Elwell
Specialist in Macroeconomic Policy

Despite the severity of the recent financial crisis and recession, the U.S. economy has so far avoided falling into a deflationary spiral. Since mid-2009, the economy has been on a path of economic recovery. However, the pace of economic growth during the recovery has been relatively slow, and major economic weaknesses persist. In this economic environment, the risk of deflation remains significant and its occurrence could derail sustained economic recovery.

Deflation is a persistent decline in the overall level of prices. It is not unusual for prices to fall in a particular sector because of rising productivity, falling costs, or weak demand relative to the wider economy. In contrast, deflation occurs when price declines are so widespread and sustained that they cause a broad-based price index, such as the Consumer Price Index (CPI), to decline for several quarters. Such a continuous decline in the price level is more troublesome, because in a weak or contracting economy it can lead to a damaging self-reinforcing downward spiral of prices and economic activity.

However, there are also examples of relatively benign deflations when economic activity expanded despite a falling price level. For instance, from 1880 through 1896, the U.S. price level fell about 30%, but this coincided with a period of strong economic growth. Whether a deflation is on balance malign or benign most often will hinge on whether the force generating the falling price level is collapsing aggregate demand or accelerating aggregate supply. Both forces exert downward pressure on the price level but have opposite effects on the level of economic activity.

Deflation can dampen economic activity through several channels. First, a falling price level will increase the real (inflation adjusted) cost of inputs, raising the unit cost of production. Second, when nominal interest rates are low, as they are now, deflation could increase real interest rates, dampening credit-supported economic activity. Third, deflation will increase the real debt burden of businesses and households that already hold debt because they will be repaying the loan principal with dollars of rising purchasing power.

The expectations of households and businesses about the future path of the price level will influence deflation’s persistence and the difficulty of stabilizing the falling price level. The expectation of further deflation can in theory create a self-reinforcing downward spiral that deepens and prolongs the fall of economic activity as households and businesses adjust their economic outlooks. To avoid that outcome, government would likely need to take policy actions that not only counter the current negative demand shock and constricted flow of credit to the economy, but also create the expectation among economic agents that the future price level will be higher than the current price level; in other words, government would need to convince economic agents to expect inflation rather than deflation.

Economic policy can in theory contain or mitigate the negative effects of a deflation caused by a negative demand shock. The conventional macroeconomic policy tools of monetary and fiscal policies could be used to support current aggregate spending and exert upward pressure on the price level, although currently high deficits restrict fiscal space for movement and policy interest rates at zero pose a challenge for the monetary authority.


Date of Report: January 12, 2012
Number of Pages: 20
Order Number: R40512
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Preserving Homeownership: Foreclosure Prevention Initiatives

Katie Jones
Analyst in Housing Policy

The foreclosure rate in the United States began to rise rapidly beginning around the middle of 2006. Losing a home to foreclosure can hurt homeowners in many ways; for example, homeowners who have been through a foreclosure may have difficulty finding a new place to live or obtaining a loan in the future. Furthermore, concentrated foreclosures can drag down nearby home prices, and large numbers of abandoned properties can negatively affect communities. Finally, the increase in foreclosures may destabilize the housing market, which could in turn negatively impact the economy as a whole.

There is a broad consensus that there are many negative consequences associated with rising foreclosure rates. Both Congress and the Bush and Obama Administrations have initiated efforts aimed at preventing further increases in foreclosures and helping more families preserve homeownership. These efforts currently include the Making Home Affordable program, which includes both the Home Affordable Refinance Program (HARP) and the Home Affordable Modification Program (HAMP); the Hardest Hit Fund; the Federal Housing Administration (FHA) Short Refinance Program; and the National Foreclosure Mitigation Counseling Program (NFMCP), which provides funding for foreclosure mitigation counseling and is administered by NeighborWorks America. Two other initiatives, Hope for Homeowners and the Emergency Homeowners Loan Program (EHLP), expired at the end of FY2011. Several states and localities have also initiated their own foreclosure prevention efforts, as have private companies. A voluntary alliance of mortgage lenders, servicers, investors, and housing counselors has also formed the HOPE NOW Alliance to reach out to troubled borrowers.

In March 2011, the House of Representatives passed a series of bills that, if enacted, would terminate the Home Affordable Modification Program (H.R. 839), the FHA Short Refinance Program (H.R. 830), and the Emergency Homeowners Loan Program (H.R. 836), as well as the Neighborhood Stabilization Program (H.R. 861), which is not a foreclosure prevention program but is intended to address the effects of foreclosures on communities.

While many observers agree that slowing the pace of foreclosures is an important policy goal, there are several challenges associated with foreclosure prevention plans. These challenges include implementation issues, such as deciding who has the authority to make mortgage modifications, developing the capacity to complete widespread modifications, and assessing the possibility that homeowners with modified loans will default again in the future. Other challenges are related to the perception of unfairness, the problem of inadvertently providing incentives for borrowers to default, and the possibility of setting an unwanted precedent for future mortgage lending.

This report describes the consequences of foreclosure on homeowners; outlines recent foreclosure prevention initiatives, largely focusing on initiatives implemented by the federal government; and discusses the challenges associated with foreclosure prevention.


Date of Report: January 12, 2012
Number of Pages: 54
Order Number: R40210
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