Fannie, Freddie Boost Risk to Levels That Once Shook Wall Street

Fannie, Freddie Boost Risk to Levels That Once Shook Wall Street Fannie Mae and Freddie Mac are taking on more interest-rate risk in their rapidly growing investment portfolios, driving a key gauge of their exposure to levels that rattled Wall Street two decades ago. Disclosures from the housing-finance giants show their duration gaps — a measure of how closely assets, liabilities and hedges offset one another — have widened sharply in recent months, leaving their holdings more exposed to rate swings. With the gaps now at roughly one year, a half-percentage point increase in rates would reduce the value of Fannie Mae’s portfolio by about $1.2 billion and Freddie Mac’s by more than $1.6 billion. Twelve months earlier, the estimated impact at both firms was minor.