A bill dealing with oversight of Fannie Mae and Freddie Mac that establishes a new affordable housing fund passed the House, but at the expense of nonprofits' rights to engage in, or affiliate with organizations that engage in, nonpartisan voter registration or lobbying activities. On Oct. 26, H.R. 1461, the Housing Finance Reform Act, which would increase regulation of federal mortgage entities, passed the House 331-90 despite a provision offered as a manager's amendment by Rep. Michael Oxley (R-OH) that disqualifies nonprofits from receiving affordable housing grants if they have engaged in voter registration and other nonpartisan voter activities, lobbying, or produced "electioneering communications." Organizations applying for the funds are barred from participating in such activities up to 12 months prior to their application, and during the period of the grant even if they use non-federal funds to pay for them. Most troubling, affiliation with an entity that has engaged in any of the restricted activities also disqualifies a nonprofit from receiving affordable housing funds under the bill. Much of the debate on the floor centered around whether nonprofits should have to make a choice between their right to freely associate, advocate and conduct voter registration, and their ability to provide much-needed services. Republicans argued that the bill did not limit political speech - as long as an organization did not want affordable housing fund monies. They also misrepresented the provision, claiming it is aimed at preventing federal funds being used for political purposes. According to Rep. Tom Feeney (R-FL), "They want to allow folks that engage in political activity, including voter registration, to have access to money that otherwise would go to low-interest loans or to help affordable housing builders at the local level that actually build bricks and mortar." However, nonprofits are already barred from using federal funds to lobby or electioneer, and have long supported current laws and regulations that prohibit the use of federal funds for lobbying and partisan political activities. Additionally, investigations have shown no pattern of abuse by nonprofits. The Rules Committee did not allow Rep. Barney Frank (D-MA) to offer his amendment to strike the anti-advocacy provision from the manager's amendment. In response to debate on the House floor that money is "fungible" and therefore housing grant funds indirectly help support nonprofit political speech, Frank argued:

"We are talking about whether groups with their own money can do other things. People have said the money is fungible. Well, when we were debating faith-based groups, when we said if you give money for day care, is that going to go to religious activities, we were told, no, they will be segregated. I agreed with that. So the argument about fungibility, apparently, appears to be itself very fungible."

Frank also agued that this provision would hit faith-based groups the hardest. The provision restricts grants to those groups that have building houses as their "primary purpose." Since the "main purpose" of many faith-based groups is faith-related, they would likely be barred from receiving housing grants. Frank urged other representatives to vote against the manager's amendment with the promise that his motion to recommit with instructions forthwith would include essentially the same manager's amendment, however, the "primary purpose" language would be changed to "among its primary purposes," and the restriction on nonpartisan voter registration and "get out the vote" work would be dropped. Such a motion to recommit forthwith, if adopted, would have forced the committee chairman to immediately report back to the House in conformity with the instructions and the bill to then automatically return to the House floor. In an extremely close vote, the House voted 210-205 in favor of Oxley's manager's amendment, which contained the nonprofit gag provision. After a number of other amendments were addressed, Frank moved to recommit with instructions forthwith to the Financial Services Committee. In another close vote, this motion failed 200-220. The members who spoke on the floor largely avoided the "affiliation" restrictions in the provision. Extremely far-reaching, the language creates "affiliations" between organizations that share resources, have overlapping boards or staff, or receive too much money from one entity. Once affiliated, the action of the affiliated entity can disqualify the nonprofit from receiving money under the Affordable Housing Fund. For example, if a private company donates office space or equipment to a housing group, the two entities are now affiliated. If the private company lobbies or endorses a candidate for federal office, the housing group would be barred from receiving money under the Affordable Housing Fund. The legislation passed the House Financial Services Committee in May on a 65-5 vote, indicating strong bipartisan support. At that time, there was no gag provision. The legislation stalled, however, because of concerns voiced by the conservative House Republican Study Committee (RSC) that the Affordable Housing Fund provision would be used to "finance third- party advocacy groups that have agendas far beyond simply increasing affordable housing for low-income Americans." As RSC member Tom Feeney (R-FL) said, "I'd rather burn the money than give it to an advocacy group." The RSC essentially blocked the bill from coming to the floor unless it contained the gag provision. At the same time, an ongoing dialogue was taking place between the sponsors of the legislation and some from the faith-based community. As the faith community learned of the restrictions on speech and voter engagement activities, it mounted a strongly opposition to the provision. Despite objections raised during drafts, the final version of the gag provision went further in the direction of restricting nonprofit speech and association rights than earlier drafts. While this further inflamed the issue for supporters of the affordable housing fund, it provided the poison pill the RSC sought, and the RSC thus allowed it to go the House floor for a vote. The prospects of Senate passage this year are unclear. Reportedly, Senate Banking, Housing and Urban Affairs Committee Chairman Richard Shelby (R-AL) opposed an affordable housing fund. The Senate version, S. 190, which passed out of committee on July 28 by a party-line vote of 11-9, does not contain an affordable housing provision. The main debate in the Senate has not focused on the affordable housing fund, but rather on the main provisions in the legislation - the oversight of Fannie Mae and Freddie Mac. Some speculate that, if an agreement on the broader oversight issues can be worked out, a compromise could likely be reached on the affordable housing fund. There is also speculation that, while the Senate bill has stalled, it may pick up speed over the next month when two reports regarding Fannie Mae oversight are expected to become public. Nonetheless, considering the tightness of the Senate's schedule, it is unlikely the bill will reach the floor this year.