Washington - XINHUA
Fannie Mae and Freddie Mac, the U.S. two mortgage giants, may need 190 billion U.S. dollars in government support if the housing market suffers a serious downturn, according to a stress test report released by the Federal Housing Finance Agency (FHFA) Wednesday. Stress tests, required by the Dodd-Frank legislation, are designed to strengthen regulations on financial market, said FHFA. The stress test, the first one done for the two mortgage giants, has set three situations to evaluate the two companies. In the worst-case scenario where the house prices would plunge 25 percent over nine quarters, Fannie Mae and Freddie Mac would need a bailout from 84.4 billion dollars to 190 billion depending on the treatment of deferred tax assets. FHFA said the projections aimed to calculate potential losses in downturn economic situations but they "are not expected outcomes." "These results of the severely adverse scenario are not surprising given the company's limited capital," said Kelli Parsons, senior vice president of Fannie Mae in a statement. Under the current bailout agreement with the U.S. government, Fannie Mae and Freddie Mac are not permitted to retain earnings to withstand a sudden, unexpected economic shock, but instead to send them to the Department of Treasury. At present, the two giants have paid 203 billion dollars to the Treasury in the form of dividend payments, more than the 188- billion bailout fund provided by the government, as the U.S. housing market has rebounded since 2012, boosting the coffers of the two companies. The stress test showed that a new government rescue plan may not be needed even a serious housing crisis happens in the future, as the 190-billion bailout is still lower than the remaining government commitment of 258.1 billion dollars under the current rescue agreement. Fannie Mae and Freddie Mac will pass the stress tests in two other lesser scenarios.