If an economic storm thrashes the U.S., federally controlled mortgage giants Fannie Mae and Freddie Mac could need to draw up to almost $160 billion from the U.S. Treasury, according to a federal report released Thursday.
In “severely adverse” circumstances, the stress test supposes hypothetical conditions, such as a four-percentage-point spike in the unemployment rate to 10% by mid-2016, along with a plunge for economic growth, according to the report from the Federal Housing Finance Agency, which regulates Fannie FNMA, +0.74% and Freddie FMCC, +1.95% Prices for homes and other assets would tumble, while market volatility would shoot higher, and spreads on domestic investment-grade bonds would grow.
Of note, FHFA does not expect these events to occur. The report is an exercise to see how Fannie and Freddie would hold up under extreme duress.
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