CBO Guarantee Fee Hike Cuts Cost of GSEs Through 2022
February 2, 2012
New Congressional Budget Office estimates released this week indicate that the CBO’s measurement of government subsidy costs for housing mortgage assistance provided to Fannie Mae and Freddie Mac is $35 billion lower than the previous projection made by CBO last summer.
The downward revision by government number crunchers is due in no small part to Congress’ recently passed tax bill, the Temporary Payroll Tax Cut Continuation Act of 2011.
According to CBO’s estimate, the government will spend another $27 billion on Fannie and Freddie between 2013 and 2022, down from the previous $62 billion CBO 10-year estimate, which is over and above the more than $182 billion in taxpayer dollars the GSEs have received to stay afloat since going into conservatorship in Sept. 2008.
The CBO said taxpayers spent $5 billion on Fannie and Freddie in 2011 with another $7 billion expected in 2012.
The legislation, which funds a two-month extension of the payroll tax cut, compels Fannie and Freddie to increase by 10 basis points the average fees for new loans and guarantees made from 2012 to 2021, with proceeds from the increase going directly to the U.S. Treasury.
“Recent legislation set new fees for loans guaranteed by [the GSEs], which CBO expects will reduce future subsidy costs,” said the CBO. “For that reason, as well as the expected stabilization of housing markets over the next several years, CBO anticipates that subsidy costs for new loans and guarantees will decline after 2012, ranging between $2 billion and $3 billion annually from 2013 to 2022.”
However, the industry is not taking Congress’ action lying down. A coalition of 19 trade associations dispatched a joint letter to House and Senate leaders this week urging them not to raid the GSEs’ g-fee revenue again as a way to pay for an extension of the tax cut for the remainder of the year.
“Diverting these fees away from their intended purpose will serve as a de-facto tax increase on homebuyers and raise costs on the very same Americans the underlying bill sought to help,” noted the industry groups. “We further believe this provision hinders necessary housing finance reforms in the years ahead, as any effort to alter the GSEs’ role in the market would result in a loss of federal revenue.”
Look for more Fannie Mae, Freddie Mac and FHFA news in the next issue of Inside The GSEs on Friday, Feb. 10, 2012.
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