FHFA Stress Test Shows Possible GSE Shortfall in a Future Crisis
May 8, 2015
The results of the Federal Housing Finance Agency’s annual stress test on the GSEs show that the duo could have up to a $157 billion shortfall in the event of another economic downturn. The test, conducted as part of a Dodd-Frank Act requirement, shows three hypothetical economic scenarios and gives information on a possible range of future financial results. The GSEs used their respective internal models to project their financial results based on the assumptions provided by the Federal Reserve and the FHFA. One of those scenarios is a “severely adverse” scenario showing how Fannie Mae and Freddie Mac would perform if home prices declined about 25 percent and the unemployment rate peaked at more than 10 percent.