Fannie Mae-No Politics (FNMA)

[Wise Man]

***BOOM*** THE FHFA'S STRESS TEST SHOWS FnF WOULD POST $15 BILLION OF NET INCOME UNDER A SEVERELY ADVERSE SCENARIO. $11 billion of Comprehensive Income (Net Worth increase or Equity). Despite the fact that FnF set aside a whopping $42 billion provision for loan losses, to absorb future credit losses, like the $20 billion credit loss expected in the 2-year period of the stress test. So, the FHFA is expecting more credit losses after the end of the stress test period, 1Q2023. Evidence that it should have increased the Income Statement projection to, at least 5 years, if it expects credit losses beyond the 1Q2023, which translates into more profits, as the losses have already been fully reserved with the $42b mentioned before. This is why the FHFA convenientely has cut the Income Statement projection to only 2 years. Theoretically, the Capital requirement should be zero dollars, because the Capital is meant to cover losses under a severely adverse scenario, and the FHFA has said it expects profits. But, my estimation of Capital requirement under the recent Capital rule is $325 billion with buffers. How crazy is that!