CBO cost estimate of FHA proposal in House: Not quite yet

April 17, 2008

Despite some suggestions in the press to the contrary, CBO has not yet issued a cost estimate for the FHA-related housing proposal that is under discussion in the House of Representatives. A bill sponsored by Mr. Frank was introduced late today and CBO is reviewing it. CBO will issue a cost estimate for the legislation soon after it is approved by the House Committee on Financial Services, and I will post a link to the cost estimate when we issue it.

In a report issued last week, CBO noted the following about many of the FHA-related proposals under discussion:

"The number of borrowers that could be assisted by such proposals would depend directly on the amount of mortgage insurance subsidy that the government provides. With moderate refinancing fees, as embodied in most recent proposals, the federal subsidy would probably amount to less than 5 percent of the new loan principal, on average. Given that scale of subsidy, CBO expects that perhaps several hundred thousand borrowers would benefit from expanded FHA-insured refinancings over the next few years. Generating higher levels of participation would require substantially deeper subsidies, which would in turn significantly increase the federal budget cost. (Under current law, any subsidy costs for FHA loan guarantees are subject to appropriation of the necessary funds. Annual appropriation acts also generally limit the dollar amount of new federal loan guarantees that FHA can enter into for a given year.)"