2001-2002 Essay Contest

Glossary of Terms

Affordable Housing: Housing which costs the occupants no more than 30 percent of their income.

Community Reinvestment Act: Requires that financial institutions help meet the credit needs of their entire communities, including low- and moderate-income areas. Examiners from the Federal Reserve and other agencies that regulate financial institutions assign CRA ratings to financial institutions as part of the examination process.

Extremely Low Income: A HUD term for households that earn less than 30 percent of the area median income.

Fair Market Rent (FMR): The HUD's assessed value of actual market rent for a unit of housing based on the cost of building and managing a rental property or the prevailing rent in the area. This estimate is updated and published on a yearly basis.

Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (Fannie Mae): Two large government-sponsored enterprises (GSEs) that provide secondary home mortgages and increase the amount of funds available for home loans. Freddie Mac combines mortgages into securities and sells these securities, while Fannie Mae purchases and reinvests mortgages from lenders. A bank can sell a mortgage loan it made to a low-income family to the GSEs in the secondary market. HUD sets targets for the GSEs to purchase mortgages on housing for low-income families.

Federal Housing Administration: HUD's Federal Housing Administration insures loans so that if buyers default, the lenders get their money. This encourages lenders to give mortgage loans to people who might not otherwise qualify for a loan.

Housing Starts: A term established by HUD referring to the construction of a new housing unit.

Housing Vouchers: Similar to the Section 8 certificates, however, the household can spend the voucher to rent any dwelling that meets minimum physical standards and can choose to increase its contribution toward rent to occupy a unit that is above the fair market rent.

Low Income: A household earning less than 80 percent of the area median income.

Moderate Housing Problems: As defined by the HUD, households experience moderate housing problems if they pay between 30 percent and 50 percent of their income for housing, their unit has moderate physical problems, or the unit is overcrowded.

Mortgage: A debt agreement in which a borrower provides a lender with a lien on some type of property as security for the repayment of a loan. The lien ends when the loan is repayed, and the borrower may use the property during the repayment.

Public Housing: Publicly constructed and rented to tenants at subsidized rates. Public housing targets low-income households and are largely owned and operated by local housing authorities. Since the 1970s, government has shifted money away from public housing to other programs.

Severe Housing Problems: As defined by HUD, a household experiences severe housing problems if they are displaced, homeless, pay more than 50 percent of their income for housing, or live in a unit with severe physical problems.

Section 8 Project-Based Programs: Encourages the private sector to build and manage low-income housing. Landlords sign contracts to rent solely to qualified Section 8 tenants and are in turn guaranteed rent. The government pays the property owner the difference between a household's contribution to rent (usually 30 percent of its income) and the fair market rent.

Section 8 Rent Certificates: Low-income households are issued certificates, or coupons, to help pay rent for privately owned units. The rental unit must meet minimum physical standards for size and quality, and the household can't spend more than the fair market rent. The eligible household pays 30 percent of its income toward the housing unit; the rent certificate covers the remaining portion of rent.

Very low income: Households earning less than 50 percent of the area median income.

Voucher: A government subsidy to or for a household to partially cover housing costs.