FHFA issues orders and instructions regarding Dodd-Frank Act stress tests

This story appeared in Bank Digest.   

The Federal Housing Finance Agency has issued orders to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks requiring them to report annual stress test results as of Dec. 31, 2017, in accordance with the Dodd-Frank Act. Each order is applicable March 1, 2018. The agency has also issued Summary Instructions and Guidance to Fannie Mae, Freddie Mac, and the FHLBanks regarding these stress tests. 

The orders, through the accompanying Summary Instructions and Guidance, prescribe for these entities the scenarios to be used for stress testing. The Summary Instructions and Guidance also provides advice concerning the content and format of required reports. 

The Dodd-Frank Act requires certain financial companies with total consolidated assets of more than $10 billion, and which are regulated by a primary federal financial regulatory agency, to conduct annual stress tests to determine whether the companies have sufficient capital to absorb losses as a result of adverse economic conditions.