Fannie Mae, Freddie Mac May Require $100 Billion In A New Crisis

This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.

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According to the results from the annual stress test of Fannie Mae and Freddie Mac released today by their regulator, the Federal Housing Finance Agency, the “GSEs” which were nationalized a decade ago in the early days of the crisis, would need as much as $100 billion in bailout funding in the form of a potential incremental Treasury draw, in the event of a new economic crisis.

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Bear in mind that the 30-year fixed-rate mortgages must reside somewhere. If not Fannie Mae and Freddie Mac’s balance sheet, then on the balance sheets of lenders (like Wells Fargo and Bank of America), or some other financial entity. Or FHA insurance fund.

The 30-year fixed-rate mortgage has considerable duration risk (compared to the much demonized adjustable-rate mortgage (ARM). 

Crisis? What crisis?

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