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37 » VISIT US ONLINE @ DSNEWS.COM FED MAKES IT TOUGHER FOR BANKS TO BE 'BIG' While the debate continues over whether or not "Too Big to Fail" still exists, the Federal Reserve is trying to give the "big" banks an incentive to get smaller. Two Fed governors, in separate public comments, announced that the Fed's stress test requirements will get tougher for systemically important institutions. In effect, the tougher stress test requirements will make it tougher for the "big" banks to be big. Fed governor Daniel Tarullo told Bloomberg television that the tougher requirements include "a significant increase in capital." Fed governor Jerome Powell said at a banking conference on ursday that he hopes the new requirements will "fully internalize the risk" their size poses to the economy and that he has "not reached any conclusion that a particular bank needs to be broken up or anything like that." Instead, Powell said the Fed will "raise capital requirements to the point at which it becomes a question that banks have to ask themselves,"according to the Wall Street Journal. Capital requirements for the banks have been significantly raised since the financial crisis in 2008, which has forced the banks to evaluate whether or not they can maintain their current size and still be profitable. JPMorgan Chase, which is the largest bank in the country by assets, has already shrunk in response to the Fed raising capital requirements during normal times in 2015, according to the Journal. e eight banks or investment banking firms affected by the Fed's new requirements are Bank of America, Citigroup, Goldman Sachs Group, Inc., JPMorgan Chase, Morgan Stanley, Wells Fargo & Co., State Street Corp., and Bank of New York Mellon Corp. e tougher stress test requirements are not the only incentive for the eight systemically important institutions to get smaller. Out of those eight institutions, the Fed and the FDIC in April jointly rejected the "living wills" (plans as to how they would enter bankruptcy without causing widespread damage to the U.S. financial industry) of five of them—Bank of America, Bank of New York Mellon, JPMorgan Chase, State Street, and Wells Fargo. FREDDIE MAC EXCEEDS PORTFOLIO REDUCTION GOAL Freddie Mac reported that it has already exceeded the 2016 goal for reducing its mortgage- related investments portfolio only a third of the way through the month, according to Freddie Mac's April 2016 Monthly Volume Summary. e mortgage-related investments portfolio for Freddie Mac contracted at an annual rate of 22.4 percent in April (which calculates to an over- the-month decline of about $6.4 billion). e contraction left the aggregate unpaid principal balance of the portfolio at $333.5 billion as of the end of April, which is nearly $6 billion lower than the 2016 cap of $339.3 billion, which is the amount the portfolio must reach by the end of the year as part of its required reduction. Freddie Mac's fellow GSE, Fannie Mae, met its year-end goal for reducing its mortgage portfolio last month. e value of Freddie Mac's mortgage- related investments portfolio has declined by approximately $72 billion since the end of March 2015, when the aggregate UPB of the portfolio was $405.6 billion. For the first four months of 2015, the portfolio has contracted at an average rate of 11.6 percent and has contracted in all but two of the last 13 months (December and January). Freddie Mac's single-family refinance- loan purchase and guarantee volume for April was $14.9 billion, which represented 57 percent of total single-family mortgage portfolio purchases or issuances during the month. Relief refinance mortgages comprised about 8 percent of Freddie Mac's total single-family refinance volume in April. e serious delinquency rate on mortgages backed by Freddie Mac declined by another 5 basis points from March to April, down to 1.15 percent. e number of loan modifications completed on Freddie Mac-backed loans totaled 3,687 in April, which brings the year-to-date total (as of April 30) up to 14,597. Freddie Mac reported a net loss of $354 million in the first quarter, which was its second in the last three quarters. e reduction of the mortgage portfolio and the wind-down of the GSEs' capital buffer, which is required to be at zero by January 1, 2018, is likely to result in more calls for GSE reform as the Obama Administration draws to a close. THE LEADER IN DEFAULT SERVICING NEWS Help shape the next issue of DS News. Drop us a line at Editor@DSNews.com. The nation's unemployment rate declined from 5.0 percent in April to 4.7 percent in May, but only 38,000 jobs were added in May; the nation's U-6 unemployment rate, which includes "marginally attached workers (including those who have stopped looking for work, but want to work) and those working part-time for economic reasons" was 9.7 percent during May, according to the Bureau of Labor Statistics. KNOW THIS

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