In fact, mortgage borrowers entered the pandemic with stronger balance sheets than in the mid 2000s and are therefore better prepared to handle a drop in home prices than they were in the last housing downturn. As for banks, as I just said, large banks are substantially more resilient today than two decades ago.
In last year’s stress test, which featured a severe global recession that included a decline in home prices of over 20 percent, we projected the largest banks could collectively maintain capital ratios at more than double their minimum requirements—even after withstanding more than $ billion in losses.