Page 36 - July-August 2018 GSE Report Flip Book

The Enterprises had drawn a combined $191.4 billion from the Department of the Treasury
under the terms of the Senior Preferred Stock Purchase Agreements (PSPAs), after receiving
funds to eliminate the net worth deficits as of December 31, 2017. The combined remaining
funding commitment under the PSPAs was $254.1 billion. In the Severely Adverse scenario
FANNIE MAE AND FREDDIE MAC JJUALN. U- ARUYG. 22001188
incremental Treasury draws are projected to range between $42.1 billion and $77.6 billion, depending on the treatment of deferred tax assets. The remaining funding commitment under the PSPAs after these projected draws would be $212.0 billion without establishing valuation allowances on deferred tax assets, or $176.5 billion if both Enterprises established valuationallowanceSsUonMdMefAerRreYdOtaFxSasEseVtsE.RELYADVERSESCENARIORESULTS
Dollars in b illions
$500
$400
$300
$200
$100
$0 Without valuation allowance on Deferred Tax
Assets
Source: FHFA
Remaining PSPA Funding Commitment
Potential Incremental Treasury Draw
Cumulative Treasury Draw after eliminating net worth deficits as of 12/31/17
$212.0
$42.1
$191.4
$176.5
$77.6
$191.4
With valuation allowance on Deferred Tax Assets
Important contributors to losses in the Severely Adverse Scenario included the following:
Important contributors to losses in the Severely Adverse Scenario included:
 The provision for credit losses was the largest contributor to comprehensive losses at both Enterprises. • The provision for credit losses was the largest contributor to
comprehensive losses at Fannie and Freddie.
 The second largest contributor to comprehensive losses at both Enterprises was the • The second largest contributor to comprehensive losses at both GSEs
global market shock impact on trading securities and available-for-sale securities.
was the global market shock impact on trading securities and available- for-sale securities.
• Comprehensive losses increased in the 2018 DFAST reporting cycle [i.e., based upon a severe global recession, accompanied by a global aversion to long-term fixed income assets] compared to the 2017 DFAST reporting cycle, mostly driven by the increase in provision for credit losses as a 3 result of the more severe decline in home prices included in the 2018 DFAST Severely Adverse scenario.
While the GSEs would still require a taxpayer bailout under the severely adverse scenario, the
level of taxpayer draw of $77.6 billion is improved from the 2017 stress test draw of nearly $100 billion.(Dodd-Frank Act Stress Tests Results Severely Adverse Scenario, Federal Housing Finance Agency, 08/07/18; HousingWire, Kelsey Ramirez, 08/07/18)
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