US Rep Frank Bill Would Use TARP Income For Housing

House Financial Services Committee Chairman Barney Frank has a plan to funnel income from the government's $700 billion bailout fund toward the housing sector.

The powerful Massachusetts Democrat last week quietly introduced legislation that aims to use $1 billion in dividends paid by the recipients of government aid to provide rental housing opportunities for low-income and homeless families. The money would go into a national housing trust fund established last summer in connection with legislation that allowed for Fannie Mae (FNM) and Freddie Mac (FRE) to be placed under government conservatorship.

The fund currently is empty, however President Barack Obama's fiscal year 2010 budget calls for it to receive $ 1 billion - a sum the Frank legislation would provide.

"This would be the seed money to get the trust fund up and running," said Danna Fischer, legislative director for the National Low Income Housing Coalition.

Fischer said the trust aims to garner $150 billion in total funding over the next decade.

Frank said it is feasible to use income from the Troubled Asset Relief Fund, known as TARP, to finance the trust for at least "a couple of years."

Frank's legislation also proposes funneling $1.5 billion in TARP dividend payments to state and local government efforts to redevelop abandoned and foreclosed properties.

"We made some money on this. It's now reasonable to use some of that to deal with these problems," Frank said.

Banks participating in TARP have so far paid the U.S. Treasury more than $4.9 billion in dividends.

Separately, Frank's legislation aims to reallocate some funds from the TARP itself.

The legislation would divert $2 billion in TARP dollars to an emergency mortgage relief program administered by the Department of Housing and Urban Development and another $2 billion for HUD to use for the creation of a program to cope with foreclosures on multifamily properties.

-By Meena Thiruvengadam, Dow Jones Newswires; 202-862-6629; [e-mail]