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Housing

The federal government plays a substantial role in the housing market. Fannie Mae and Freddie Mac purchase and guarantee loans from banks and other lenders, and the Federal Housing Administration and some other agencies increase the availability of mortgages by assuming most of the risk of default on loans to eligible home buyers. In addition, the federal tax code encourages home ownership by allowing deductions of mortgage interest and property taxes and excluding most capital gains from taxation when a home is sold. CBO's work (including its analysis of Fannie Mae and Freddie Mac) assesses the effects of those policies and the impact of legislative proposals regarding the housing market.

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Housing Market Crisis

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Modifying Mortgages Involving Fannie Mae and Freddie Mac: Options for Principal Forgiveness
May 01, 2013
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Options for Principal Forgiveness in Mortgages Involving Fannie Mae and Freddie Mac: Working Paper 2013-02

working paper

May 1, 2013

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Abstract

Mitchell Remy and Damien Moore

CBO examined three options under which Fannie Mae and Freddie Mac would provide principal forgiveness to certain distressed borrowers—specifically, to borrowers who are eligible or could become eligible for the Home Affordable Modification Program (HAMP). Such borrowers represent about 4 percent of all those with mortgages involving Fannie Mae or Freddie Mac, CBO estimates. The options would reduce the amount owed by borrowers to as low as 115 percent (through the HAMP Principal Reduction Alternative), 100 percent, and 90 percent, respectively, of the value of their homes. Any gain or loss arising from the way the distressed mortgages are handled by Fannie Mae and Freddie Mac under the options would ultimately accrue to taxpayers because, in CBO’s judgment, the federal government is now the effective owner of those enterprises. CBO finds that all three options would probably result in small savings to the government, slightly reduce mortgage foreclosure and delinquency rates, and slightly boost overall economic growth. Designing a program that affected a larger number of borrowers and had a greater impact on the housing market and the economy would require a significant departure from HAMP’s current eligibility rules.

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Options for Principal Forgiveness in Mortgages Involving Fannie Mae and Freddie Mac: Working Paper 2013-02
May 01, 2013
The Budgetary Cost of Fannie Mae and Freddie Mac and Options for the Future Federal Role in the Secondary Mortgage Market
June 02, 2011
Policies for Increasing Economic Growth and Employment in 2012 and 2013
November 15, 2011
An Evaluation of Large-Scale Mortgage Refinancing Programs
September 01, 2011

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Modifying Mortgages Involving Fannie Mae and Freddie Mac: Options for Principal Forgiveness

report

May 1, 2013

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May 2013 (2)
April 2013 (14)
March 2013 (22)
February 2013 (10)
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December 2012 (4)
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Fannie Mae, Freddie Mac, and the Future of the Secondary Mortgage Market

posted by Damien Moore & David Torregrosa on April 4, 2013

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H.R. 1003, a bill to improve consideration by the Commodity Futures Trading Commission of the costs and benefits of its regulations and orders

cost estimate

April 1, 2013

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May 2013 (2)
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March 2013 (22)
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U.S. Economic Performance

posted by Doug Elmendorf on March 21, 2013

monthly archive

May 2013 (2)
April 2013 (14)
March 2013 (22)
February 2013 (10)
January 2013 (11)
December 2012 (4)
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Snapshot of Guarantees of New Residential Mortgages

posted by Susanne Mehlman on March 15, 2013

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Snapshot of Guarantees of New Residential Mortgages

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March 15, 2013

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Federal Grants to State and Local Governments

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March 5, 2013

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April 16, 2013

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Federal Programs that Guarantee Mortgages—February 2013 Baseline

data or technical information

February 5, 2013

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