The results confirmed a major policy success in the extreme de-risking of the two companies while in conservatorship--stress results are down about 80% in the five years since they were first measured! This, in turn, has important implications for the Federal Housing Finance Agency’s much-awaited capital rule that would apply to the GSEs post-conservatorship.
These stress tests, done each year since 2013 under a government-designed regimen known as DFAST (Dodd-Frank Act Stress Test), are similar to the well-publicized stress tests administered to large banks via the Federal Reserve.
The regulator and conservator of the GSEs, the Federal Housing Finance Agency (FHFA), closely organizes, supervises, and monitors the testing process and receives the results. It all starts with the same economic and financial “severely adverse scenario” specified by the Federal Reserve. The latest results were based upon the GSE’s year-end 2018 financial statements.