To us, the most striking aspect of Fannie’s 3Q earnings is the totally different direction Fannie has taken on mortgage credit risk.  We find it striking that the GSEs could take so different a view of mortgage credit risk – the most critical exogenous factor determining their future.  It’s notable also that FHFA is not forcing Fannie to be extremely conservative when it comes to credit provisions given the lack of capital at both GSEs.

The full report is available to retainer clients. To find out how you can sign up for the service, click here.