CBO slashes cost of Fannie, Freddie over next decade
Taxpayers will spend another $27 billion between 2013 and 2022 subsidizing Fannie Mae and Freddie Mac, according to the Congressional Budget Office estimates released Tuesday. The CBO reduced its estimate by $35 billion from last year's projection of $62 billion because of an upcoming raise in the guarantee fees the mortgage giants will charge lenders. Congress agreed in late December to fund the temporary payroll tax cut by raising the Fannie and Freddie guarantee fees by 10 basis points through 2021. The CBO said $5 billion was spent to subsidize the mortgage giants in 2011 and another $7 billion is expected this year. Both Fannie and Freddie drew $183 billion in bailouts from the Treasury Department since entering conservatorship in 2008. As of Sept. 30, the companies still owe $151 billion. "Recent legislation set new fees for loans guaranteed by those entities, which CBO expects will reduce future subsidy costs. 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," according to the report Tuesday. The CBO said the subsidies will decline to between $2 billion and $3 billion annually over the next decade because of the payroll tax extension. Borrowers will potentially pay more for mortgages guaranteed by the GSEs due to the fee increases. The Mortgage Bankers Association estimates the average borrower could pay an additional $4,000 in fees over the life of a $200,000 home loan because of the g-fee raise. The Federal Housing Finance Agency said the g-fee hike would go into effect in April. Write to Jon Prior. Follow him on Twitter @JonAPrior.