FHFA this week released the order and guidance sent in March to the GSEs, making clear that it has again followed the Federal Reserve’s CCAR lead in setting the parameters of stress-test scenarios. As we earlier noted, the Fed’s test this year is a lot tougher than the 2017 round. Given that stringent scenarios for single- and multi-family mortgages are among the toughest parts of the newly-tough tests, the GSEs will likely show even deeper capital holes under stress. While these capital shortfalls are likely well within remaining draw capacity, they are still way ugly. As Treasury Secretary Mnuchin said again on Monday, the Trump Administration seems set on redesigning the GSEs by administrative fiat before it finds out the hard way if Fannie and Freddie are less resilient than the Fed thinks they are.
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