WASHINGTON (2/15/11)—The size and amount of guaranteed loans and the size of investment portfolios held by government-sponsored entities (GSEs) Fannie Mae and Freddie Mac will be reduced under the Obama administration’s fiscal 2012 budget. The budget also notes that the government conservatorship of these entities, which began in 2008 and has cost taxpayers $150 billion so far, will be gradually ended. The budget also addresses the Small Business Administration, 7(a) loans, and the Community Development Financial Institutions Fund, all topics of interest to credit unions. (See related story: $3.7 trillion budget brings deficit to record $1.6 trillion) Similar ideas on treatment of the GSEs were proposed in the Obama administration's Friday release on the GSEs. That release set forth a trio of potential outcomes, including almost completely privatizing the housing finance system, limiting the government’s intervention in the mortgage market to times of financial distress, and using a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages. The document does not propose specific legislative solutions, and notes that reducing conforming loan limits, increasing guarantee fees, and requiring higher down payments from potential homeowners could be handled through internal regulatory changes. The White House and legislators will soon begin work on the future of the GSEs, and CUNA will watch closely for any future developments. A breakout session on GSE reform will be held March 1, in conjunction with CUNA's Governmental Affairs Conference, which begins on Feb. 27 in Washington, D.C. For a CUNA summary of the GSE proposal, use the resource link.