President Obama used last night's State of the Union address to lay out his agenda for the coming "year of action," as he described it. NTUF analyzed the remarks and estimated that, if the 13 proposals we were able to score are passed, federal spending would increase by just under $40 billion per year.
At one point in the speech, the President asked Congress to help him bring stability to housing markets without burdening taxpayers:
"And since the most important investment many families make is their home, send me legislation that protects taxpayers from footing the bill for a housing crisis ever again, and keeps the dream of homeownership alive for future generations of Americans."
There's been legislation introduced in Congress that aims for a similar goal, and NTUF featured it in a recent issue of The Taxpayer's Tab. We based our score of the President's housing proposal on the Congressional Budget Office's (CBO) cost estimate for S. 1376, the FHA Solvency Act. Senator Tim Johnson (D-SD) introduced that bill in order to address financial difficulties facing the Federal Housing Administration's (FHA) Mutual Mortgage Insurance Fund (MMIF). The MMIF required a $1.7 billion bailout from taxpayers in 2013 after it couldn’t meet financial obligations it took on during the housing market crisis.
Part of the bill stipulates that the troubled FHA program has to maintain a higher capital reserve ratio (three percent) than it has in the past (two percent), in order to ensure it has sufficient funding to cover expected losses. One of the ways in which it does that is by raising premiums on the mortgage insurance it offers.
This doesn't directly decrease federal outlays, but CBO records these receipts as offsets against spending. The higher rates would take effect in 2018, when CBO expects the government to collect $522 million. Meanwhile, the bill's other requirements would increase spending by about $2 million per year.
This proposal was the only one the President made in his speech that NTUF was able to quantify as a net savings measure. Note that isn't because it reduces outlays, but rather, increases receipts enough to offset the program's potential long-term costs.
This could help minimize the risk that taxpayers would be stuck "footing the bill" for the next housing crisis, but would it guarantee that this won't happen again? The FHA guarantees approximately 1 in 5 mortgages for new homes. Fannie Mae, a "government-sponsored enterprise", remains the largest single issuer of single-family mortgage-related securities. Its market share covers nearly half of all new single-family mortgages. As long as federally-backed entities continue to play such a significant role in the market for new mortgages, taxpayers will be at risk.