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1 Fair-Value Estimates of the Cost of Federal Credit Programs in 2019 1 (June 2018)

handle is hein.congrec/frvlesfcp0001 and id is 1 raw text is: / .. . JUNE 2018 Fair-Value Estimates of the Cost of Federal Credit Programs in 2019 Summary The federal government supports some private activities by providing credit assistance to individuals and busi- nesses. In this report, the Congressional Budget Office estimates the lifetime costs that are projected to be incurred by those federal credit programs in 2019. The report shows two kinds of estimates: estimates that were created by following procedures prescribed by the Federal Credit Reform Act of 1990 (FCRA), most of which were produced by other agencies; and estimates newly produced by CBO that account for the market value of the government's obligations, which are called fair-value estimates. Using FCRA procedures, CBO estimates that new loans and loan guarantees issued in 2019 would result in savings of $37.4 billion. But using fair-value procedures, CBO estimates that those loans and guarantees would have a lifetime cost of $37.9 billion. More than 80 per- cent of the difference between those amounts comes from three sources: 0 The guarantees that Fannie Mae and Freddie Mac will make in 2019, analyzed on a FCRA basis, are projected to save the federal government about $23.5 billion. Under fair-value accounting, however, the guarantees would cost about $2.5 billion. 0 The Department of Education's student loan pro- grams are projected to save $4.1 billion on a FCRA basis but to cost $16.1 billion on a fair-value basis. The Department of Housing and Urban Development's (HUD's) loan and loan guarantee pro- grams are projected to save $9.5 billion on a FCRA basis but to cost $7.1 billion on a fair-value basis. Federal Credit Programs Federal credit assistance consists of two types: direct loans and guarantees of loans made by private finan- cial institutions. For this report, CBO analyzed the 79 programs in which the federal government provides credit assistance. The total amount of federal credit assistance projected for 2019 is $1.5 trillion, consisting of new direct loans totaling $123 billion and new loan guarantees covering $1.4 trillion of loans. Just a few programs are projected to provide more than 90 per- cent of that total-specifically, the programs offering mortgage guarantees and student loans. The largest program by far is Fannie Mae and Freddie Mac's guar- antees of mortgage-backed securities. In 2019, those government-sponsored enterprises (GSEs) are projected to provide $917 billion in new guarantees. Discretionary programs, whose funding is provided in annual appropriation acts, accounted for 63 of the 79 programs analyzed and 24 percent of the projected dollar value of loans and guarantees. The largest discre- tionary programs are the mortgage programs run by the Federal Housing Administration (FHA) and the Rural Housing Service (RHS), the small-business loans pro- vided by the Small Business Administration (SBA), and the long-term guarantees provided by the Export-Import Bank. Notes: Numbers in the text and tables may not add up to totals because of rounding. Unless the report indicates otherwise, all years referred to are federal fiscal years, which run from October 1 to September 30 and are designated by the calendar year in which they end. For the most part, this report uses the names for departments, agencies, and programs that are given in the Office of Management and Budget's Federal Credit Supplement, which is available at www.whitehouse.gov/omb/supplemental-materials.

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