CBO Report Examines GSE Conservatorship Exit Costs
July 29, 2025
The nonpartisan Congressional Budget Office, which is tasked with calculating the federal budgetary costs of proposed legislation or policy changes, recently issued a report that examines the costs and benefits of ending Fannie Mae and Freddie Mac (the GSEs) conservatorship.
Why it matters: President Donald Trump has publicly expressed his desire to change the status quo of the GSE conservatorship. While most expect Trump to conclude the conservatorship and return the GSEs as private entities, the administration has also considered maintaining some element of government control.
What they’re saying: In a
Politico story on the report, key GOP legislators noted they are interested in working on GSE conservatorship, but they still expect the effort to commence in 2026. CBO has issued a number of reports on GSE conservatorship in recent years, and the cost considerations will likely help guide lawmakers on future efforts.
By the numbers: The report, titled
Seven Things to Know About CBO’s Budgetary Treatment of Potential Changes to Fannie Mae and Freddie Mac, walks through scenarios and revenue/cost considerations through the lens of CBO’s rules. While CBO scoring conventions have been subject to bipartisan criticism, the analysis will provide a benchmark to lawmakers as they consider potential action.
One important consideration is how CBO would score the government’s guarantee. The report specifically addresses this consideration:
- “If CBO no longer considered the GSEs to be government entities, it would incorporate the estimated cost of any explicit federal guarantee in its future cost estimates and baseline projections.”
- As a reminder, the pre-2008 guarantee was “implicit” such that investors expected the government would step in to ensure timely repayment of defaulted loans—which it did.
- The Treasury’s support is explicit to the entities themselves, but not the MBS. A change in the conservatorship would open questions on how the government would backstop the GSEs or mortgages.
- Even if the guarantee were implicit, CBO says it would consider assessing the costs: “Before the GSEs were placed in conservatorships, CBO did not incorporate their implicit federal guarantee in its budget estimates. But the events of 2008 provide support for recording the cost of such a guarantee if the GSEs were released from government control without an explicit federal backstop.”
Go deeper: The report’s seven considerations are listed below:
- CBO projects that the GSEs’ future mortgage guarantees have a budgetary cost.
- CBO treats the GSEs as if they were part of the government.
- Releasing the GSEs from government control would result in both federal savings and federal costs.
- CBO projects the budgetary effects of the GSEs’ mortgage guarantees on a fair-value basis.
- CBO’s baseline budget projections and cost estimates incorporate administrative and judicial actions.
- CBO would incorporate the cost of the Treasury’s implicit or explicit commitments to the GSEs in cost estimates.
- CBO’s estimate of the proceeds earned from selling the Treasury’s shares in the GSEs would depend on many factors.
Contact David McCarthy (dmccarthy@crefc.org) with any questions.