American Banker, March 25, 2022, Fed watching red-hot housing market for financial stability risks
“In last year’s stress test, which featured a severe global recession that included a decline in home prices of over 20%, we projected the largest banks could collectively maintain capital ratios at more than double their minimum requirements — even after withstanding more than $470 billion in losses,” Waller said.
For these reasons, Waller said, the housing market likely doesn’t pose an imminent threat to financial stability. Yet, while banks are well prepared for a shock, with a variety of liquidity sources at their disposal, those fallbacks are not available to the various nonbank lenders and servicers that have entered the market during the past 15 years, Waller noted.
