We’re still waiting for the results of the Fannie/Freddie stress test FHFA promised in September. But, if it’s anything like the new one launched by the FRB for the nation’s biggest banks, Fannie and Freddie will be even harder to privatize because the hurdles they must surmount to be credible entities has grown even higher. In the near term, though, the banking exercise strengthens the GSEs’ hands in two ways: first, by putting still more capital pressure on big banks that forces still more securitization and, second, by requiring big servicers to come to terms with buy-back and related risk. Once recognized, loss is as good as taken, meaning that delay no longer works in the banks’ favor.
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