Fannie Mae, Freddie Mac May Require $100 Billion In A New Crisis (Or Some Entities May)

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.

Fannie bailout_0 (1)

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 insurace fund.

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

Crisis? What crisis?