As of July 2025, Milliman’s estimate for the capital required under the Enterprise Regulatory Capital Framework (ERCF) for Fannie Mae’s and Freddie Mac’s (Enterprises) single-family exposures under the standardized approach is for a combined capital requirement of $189 billion. The capital requirement for Fannie Mae is estimated to be $99 billion, and the capital requirement for Freddie Mac is estimated to be $90 billion.
Both Enterprises leverage Credit Risk Transfer (CRT) programs to transfer the credit risk of guaranteed mortgages to third parties. In recognition of the benefit of CRT, CRT transactions serve as a source of capital under the standardized approach. The capital benefit of the CRT program is estimated to be $19 billion for Fannie Mae, and the capital benefit for Freddie Mac is estimated to be $21 billion, for a 23% reduction in capital.
Within the ERCF framework, an adjustment called the Counter Cyclical Adjustment is applied to a loan’s loan-to-value to account for potential overvaluation or undervaluation of home prices compared to a long-term average growth rate. Approximately 1/3 of the required capital for both Fannie Mae (31%) and Freddie Mac (33%) is a result of this adjustment.
Freddie Mac and Fannie Mae have been in conservatorship since 2008. ERCF became effective in 2024, and ERCF is an important step in releasing the Enterprises from conservatorship. This report provides an analytical approach to evaluating the capital required for release from conservatorship under the ERCF. The report is updated quarterly using the most recent data available to Milliman.
Milliman estimated the required ERCF capital using the publicly available MBS disclosure data, with performance data as of July 2025. Due to data limitations, single-family exposures not currently in outstanding MBS securities are excluded from this estimate (this includes loans bought out of MBS for loss mitigation/foreclosure activity). In addition, the estimates rely on the original credit score in estimating ERCF capital, as updated credit scores are not disclosed in the MBS data. Additional assumptions are required given data limitations in the publicly available data. Milliman compared the ERCF capital estimates to Freddie Mac’s and Fannie Mae’s quarterly ERCF public disclosures, and the capital estimates are consistent with the Enterprise’s public disclosures.
Disclosure
Milliman is providing this report for information purposes, and the information presented should not be relied upon for any other purpose. Milliman’s work product is not intended to provide actuarial, legal, accounting, or investment advice. Milliman does not intend to benefit any third-party recipient of its work product.
Models used in the preparation of our analysis were applied consistently with their intended use. We have reviewed the models, including their inputs, calculations, and outputs for consistency, reasonableness, and appropriateness to the intended purpose and in compliance with generally accepted actuarial practice and relevant actuarial standards of practice (ASOP). The models, including all input, calculations, and output may not be appropriate for any other purpose. In some instances, external models were relied upon by Milliman; Milliman cannot ensure the accuracy or maintenance of those models.
In performing our analysis, we relied on datasets and other information provided by Freddie Mac, Fannie Mae and the FHFA. We have not audited or verified this data. If the underlying data or other listings are inaccurate or incomplete, the results of our analysis may also be inaccurate or incomplete.