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Fannie Mae and Freddie Mac look like they would hold up better in a severe downturn today than their collective stress tests indicated in 2024.<\/p>\n
The tests modeled how they’d fare after absorbing losses like a total $36.1 billion provision in net chargeoffs plus foreclosed property expenses. That shows the credit losses they’d be likely to face is closer to the $35 billion Even after certain other negative line items beyond credit losses such as mark-to-market adjustments for securities, this year’s tests found that Fannie and Freddie combined would have $8.5 billion in total comprehensive income in a downturn, compared with the $4.2 billion in 2024.<\/p>\n The tests did also note that the GSEs would face a $6.8 billion loss when an allowance for deferred tax assets (DTA) is included, but this also marked an improvement from a year ago. In 2024, the GSEs’ stress tests modeled a combined comprehensive loss of $12.8 billion on this basis.\u00a0<\/p>\n The Dodd-Frank Act stress tests include figures that account for DTA allowances because a downturn like the one that forced Fannie and Freddie into conservatorship could impact the value of these future tax benefits. The GSEs have re-established solid profitability since then.<\/p>\n