A plan for tighter supervision of Fannie Mae is entangled in a dispute over whether money to house low-income people can go to community groups engaging in nonpartisan get-out-the-vote drives, Associated Press reported today.

The ban was recently attached to the legislation, which aims to put tighter controls of government-sponsored enterprises Fannie Mae and Freddie Mac into effect. A House vote is expected on the legislation today.

Under consideration are restrictions on a special low-income housing fund that the two companies finance. The legislation would prohibit nonprofit community groups from getting any of that money if they’ve used their own funds for voter registration or get-out-the-vote drives, reports said.

The White House opposes the legislation on a broader issue: that it would not force the mortgage companies to reduce their huge holdings, now about $1.5 trillion.

An array of civil rights organizations, unions and faith-based groups joined House Democrats in protesting the proposed restrictions on nonprofits, reports said. Opponents said current laws provide sufficient safeguards, AP reported today.

The ban was recently attached to the legislation by House Banking Committee Chairman Rep. Michael Oxley, R-Ohio, reports said.

Debate on the floor of the House will mark the farthest that efforts to stiffen oversight of the companies has gone in years of discussion on Capitol Hill.

While the House has moved forward, momentum in the Senate has fizzled, as Senate Banking Committee Chairman Richard Shelby of Alabama has been unable to forge consensus with Democrats.

Industry analysts have said that unless there is a compromise in the Senate, nothing will happen.

Congress is weighing legislation to create a new regulator for the government-sponsored housing enterprises following multibillion-dollar accounting problems at Fannie Mae and Freddie Mac.

The agency last year uncovered accounting violations at Fannie Mae, setting off investigations by the Securities and Exchange Commission and the U.S. Justice Department and several shareholder lawsuits. As a result, the company will have to restate earnings by as much as $12 billion.

In December 2004, Fannie Mae replaced Franklin Raines, its chairman and CEO, who announced he was taking early retirement, and Fannie Mae’s chief financial officer, Timothy Howard, resigned Dec. 21.

Fannie Mae’s financial accounting troubles have drawn shareholder lawsuits and investigations by the Justice Department and the Securities and Exchange Commission.

Freddie Mac, Fannie’s fellow major government-sponsored enterprise, also experienced a management shakedown in 2003 when accounting irregularities surfaced.

The company has since restated several past years’ earnings amounting to approximately $5 billion. The Office of Federal Housing Enterprise Oversight fined the company $125 million.

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Send tips or a Letter to the Editor to janis@inman.com or call (510) 658-9252, ext. 140.

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