CBO Report Analyzes Housing Goal Structure for GSEs
Written By: Joel Palmer, Op-Ed Writer
Fannie Mae and Freddie Mac have met or exceeded nearly all of their housing goals in the last several years, according to a report released this month by the Congressional Budget Office (CBO).
Using data published by the Federal Housing Finance Agency (FHFA), the CBO concluded that the two GSEs met or exceeded yearly single-family housing goals from 2018 and 2022. The one exception occurred in 2022, when Fannie Mae did not meet a benchmark for low-income purchase loans, which the CBO said was to an increase in the benchmark level caused by the method FHFA used to develop its market forecast.
The CBO also concluded that Fannie and Freddie met or exceeded all of their multifamily goals from 2015 to 2022. The report noted a change in how multifamily benchmarks are defined, beginning in 2023. Since that year, benchmark levels are being defined as the percentage of affordable units in a multifamily property, whereas the previous method used the overall number of affordable units in financed properties the GSEs purchased. The change was made to minimize the burden of forecasting benchmark levels.
The CBO estimates that in fiscal year 2025, nearly 750,000 households purchasing a single-family home will each receive an “implicit subsidy” (in the form of lower fees) averaging $2,282 because their mortgages are goal-eligible based on the borrower’s income and other factors.
Conversely, about 1.4 million households purchasing a single-family home will pay an “implicit tax” (in the form of higher fees) because their mortgages are not goal-eligible. About 230,000 of the latter households whose mortgages are on investment properties and second homes will each pay an average of nearly $8,000 in higher fees. The average on the remaining mortgages in this category will pay an average of about $160 in higher fees.
CBO estimates that in the next fiscal year, the “implicit subsidy” will result in the GSEs’ purchasing about 37,000 additional mortgages that meet the goals’ requirements. The “implicit tax" will result in their purchasing roughly 29,000 fewer mortgages that do not meet the requirements.
The report explained the different categories of housing goals for Fannie and Freddie. Single-family goals are based on purchasing a certain percentage of loans of mortgage borrowers who are at or below 80 percent or 50 percent of area median income (AMI). Subgoals are based on defined census tracts. Multifamily housing goals are intended to ensure that Fannie and Freddie contribute to the availability of affordable rental housing.
The report also explained in detail how fees charged by the GSEs are set and how they are used to achieve housing goals. There are also sections on how fee waivers for purchase loans are determined, the amounts of fees and subsidies, and the effects of the housing goals on the GSEs’ overall operations.
The report “was prepared to enhance the transparency of the work of the Congressional Budget Office. In keeping with CBO’s mandate to provide objective, impartial analysis, the report makes no recommendations.”
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
