Fannie Mae Would Need New Bailout in Downturn, FHFA Says

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Fannie Mae Would Need New Bailout in Downturn, FHFA Says

Fannie Mae Would Need New Bailout in Downturn, FHFA Says

Bloomberg-

Fannie Mae and Freddie Mac (FMCC) could require an additional bailout of as much as $190 billion in a severe economic downturn, according to the results of stress tests released by the regulator for the U.S.-owned companies.

The two mortgage-finance giants, which have already taken $187.5 billion in taxpayer aid since 2008, would need more funds to stay afloat if home prices plummeted in a severe downturn, the Federal Housing Finance Agency said in a report today. The stress tests, mandated by the Dodd-Frank Act, use the same assumptions that the Federal Reserve does in gauging the ability of the nation’s largest banks to withstand a recession.

The results reflect the terms of the companies’ bailout, which require them to send to the Treasury all of their quarterly profits above a minimum net worth threshold. That money, counted as a return on the U.S. investment, prevents them from rebuilding capital or paying down debt to taxpayers.

“These results of the severely adverse scenario are not surprising given the company’s limited capital,” Fannie Mae (FNMA) Senior Vice President Kelli Parsons said in a statement. “Under the terms of the senior preferred stock purchase agreement, Fannie Mae is not permitted to retain capital to withstand a sudden, unexpected economic shock of the magnitude required by the stress test.”

The companies would need $84 billion to $190 billion by the end of 2015 in the worst circumstances, depending on accounting assumptions, the tests showed.

[BLOOMBERG]

FHFA Announces Results of Fannie Mae and Freddie Mac Stress Tests

FOR IMMEDIATE RELEASE
4/30/2014

Washington, DC – The Federal Housing Finance Agency (FHFA) today released a report providing updated information on possible ranges of future financial results of Fannie Mae and Freddie Mac under specified scenarios.  The report, Projections of the Enterprises’ Financial Performance, reflects results of stress tests Fannie Mae and Freddie Mac are required to conduct, starting this year, under the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The stress tests are designed to determine whether Fannie Mae and Freddie Mac could absorb losses as a result of adverse economic conditions. 

The report also contains the results of annual financial results projections that FHFA has published since 2010 (the “FHFA scenarios”).  The FHFA scenarios reflect forward-looking financial projections across three possible house price paths and were developed in conjunction with Fannie Mae and Freddie Mac.  Next year, only the Dodd-Frank Act Stress Tests will be required.

Projections of the Enterprises’ Financial Performance

Additional links:

2014 Summary Instructions and Guidance
2014 Scenario Assumptions (PDF)
2014 Scenario Assumptions (spreadsheet)
2014 Global Market Shock Assumptions (spreadsheet)
2014 Reporting Templates – Enterprises (spreadsheet)

2014 Reporting Templates – Scenario Variables and Assumptions (spreadsheet)

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One Response to “Fannie Mae Would Need New Bailout in Downturn, FHFA Says”

  1. TheMotherload says:

    So the f***ing criminal banks dump their “toxic mortgages” on the GSEs and the GSEs are saying that they need another bailout.

    So…..can anyone see that this is yet ANOTHER back door bailout to the criminal banking industry? When are we going to charge the gates with pitchforks?

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