H.R. 2767, Protecting American Taxpayers and Homeowners Act of 2013

Cost Estimate
October 28, 2013

As ordered reported by the House Committee on Financial Services on July 24, 2013

H.R. 2767 would require the Federal Housing Finance Agency (FHFA) to repeal the charters of Fannie Mae and Freddie Mac and end the operations of those firms five years after enactment of the bill (and subject to certain conditions). Thus, after 2018, those two government-sponsored enterprises (GSEs) would cease to guarantee new mortgages. The legislation would also make certain changes to the operation of the GSEs during the next five years and to other federal housing programs. In addition, the bill would create a statutory framework for regulating financial instruments known as covered bonds (full-recourse debt obligations that are secured by a pool of performing assets).

Taking all of the spending provisions together, CBO estimates that enacting H.R. 2767 would increase direct spending by $229 million over the 2014-2018 period but decrease direct spending by $6.6 billion over the 2014-2023 period. The savings over the coming decade as a whole are due primarily to the winding down of Fannie Mae and Freddie Mac and the resulting reduction in federal subsidies for mortgages that will be guaranteed by those entities under current law.

In addition, CBO and the staff of the Joint Committee on Taxation (JCT) estimate that enacting H.R. 2767 would reduce revenues by $853 million over the 2014-2023 period. About half of that loss of revenues stems from changes in tax rules related to covered bonds, and much of the rest owes to a reduction in certain assessments paid by Fannie Mae and Freddie Mac to the government (which are recorded in the budget as revenues).

On balance, CBO estimates that the changes in direct spending and revenues stemming from enactment of H.R. 2767 would reduce deficits by $5.7 billion over the 2014-2023 period. Pay-as-you-go procedures apply because enacting the legislation would affect direct spending and revenues.

CBO also estimates that implementing this legislation would result in a net decrease in discretionary spending of $41.2 billion over the 2014-2023 period assuming enactment of future appropriation laws necessary to implement the legislation’s provisions. That potential reduction in discretionary spending would stem from a provision establishing a higher reserve requirement than under current law for the Federal Housing Administration’s (FHA’s) single- and multifamily programs and from an increase in the value of mortgages guaranteed by FHA after the GSEs cease operations. Other effects of the legislation on discretionary spending would be much smaller and have largely offsetting budgetary effects.

CBO has determined that the nontax provisions of H.R. 2767 would impose intergovernmental and private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) on mortgage servicers, their affiliates, creditors of certain mortgages, and some financial institutions. The bill also would preempt some state laws related to demonstrating ownership of a mortgage. CBO estimates that the aggregate cost of the mandates in the bill would fall below the annual thresholds for intergovernmental and private-sector mandates established in UMRA ($75 million and $150 million in 2013, respectively, adjusted annually for inflation). JCT reviewed the tax provisions of H.R. 2767 and determined that those provisions contain no private-sector or intergovernmental mandates as defined in UMRA.