Updated Estimates of the Subsidies to the Housing GSEs

CBO estimates that the total federal subsidy to the three housing government-sponsored enterprises (GSEs) rose to $23 billion in 2003, an increase of nearly 70 percent over the $13.6 billion in 2000 that CBO reported in its May 2001 study. That jump in the value of the subsidy stems from the enterprises’ rapid expansion during 2001. Those estimates are based on the assumption that any increase in the GSEs’ outstanding debt and mortgage-backed securities (MBSs) are sustained only until the acquired mortgages mature. Under an alternative assumption that the GSEs’ issued debt and MBSs are reissued when they mature, the federal subsidy for 2003 would be over $46 billion, up from about $20 billion in 2000. CBO’s current analysis, which relies on the same methodology used for its earlier study, comes to essentially the same conclusions as a recent study by a Federal Reserve economist: the GSEs receive substantial subsidies and a significant portion of them is not passed through to borrowers.