​​​​​​Revised 6/12/2023

​​Overview

​Fannie Mae and Freddie Mac (the “Enterprises”) are required to conduct annual stress tests pursuant to Federal Housing Finance Agency (FHFA) rule 12 CFR § 1238, which implements section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Section 165(i)(2) of the Dodd-Frank Act, as amended by section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”) requires certain financial companies with total consolidated assets of more than $250 billion, that are regulated by a primary federal financial regulatory agency, to conduct periodic stress tests to determine whether the companies have the capital necessary to absorb losses as a result of severely adverse economic conditions. These changes became effective on March 24, 2020. This is the ninth implementation of the Dodd-Frank Act Stress Tests (DFAST) for the Enterprises.

In September 2008, FHFA suspended capital requirements after placing Fannie Mae and Freddie Mac into conservatorships. The Senior Preferred Stock Purchase Agreements that were established between the Department of the Treasury (“Treasury”) and each Enterprise limited the amount of capital that each Enterprise could hold to a Capital Reserve Amount of $3.0 billion. However, on September 27, 2019, FHFA, acting in its capacity as the conservator of the Enterprises, and Treasury entered into a letter agreement modifying the dividend and liquidation preference provisions of the senior preferred stock held by Treasury. Effective with the third quarter 2019 dividend period, the Enterprises were not required to pay further dividends to Treasury until they accumulated over $25 billion in net worth at Fannie Mae and $20 billion in net worth at Freddie Mae. Subsequently, on January 14, 2021, FHFA and Treasury announced amendments to the Senior Preferred Stock Purchase Agreements. The amendments allow the Enterprises to continue to retain earnings until they satisfy the requirements of the 2020 Enterprise Regulatory Capital Framework.

Notwithstanding the capital limits stipulated in the Senior Preferred Stock Purchase Agreements, FHFA requires the Enterprises to conduct DFAST annually in order to provide insight into risk exposure and potential sources of losses in the prescribed conditions. This report provides updated information on possible ranges of future financial results of the Enterprises under severely adverse conditions. The severely adverse conditions assumed are identical for both Enterprises.

The projections reported here are not expected outcomes. They are modeled projections in response to “what if” exercises based on assumptions about an Enterprise’s operations, its loan performance, macroeconomic and financial market conditions, and house prices. The projections do not define the full range of possible outcomes. Actual outcomes may be different.

The 2022 DFAST Severely Adverse scenario is described below. The Enterprises used their respective internal models to project their financial results based on the assumptions provided by FHFA. While this results in a degree of comparability between the Enterprises, it does not eliminate differences in the Enterprises’ respective internal models, accounting differences, or management actions.​

​June 2023 Update

In November 2022, Fannie Mae announced that it was reevaluating its 2022 stress test results and associated reporting due to the recent identification of errors in an underlying model. Fannie Mae has completed its evaluation and this document reflects Fannie Mae’s corrections of the identified errors.

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