Topic:
a repeat of The Crisis
The Good, the Bad and the Ugly
A little of something bad can ruin the whole batch. We ranked Fannie’s Fort Myers mortgage portfolio loan-by-loan and found that in a repeat home-price crash, 10% of the loans generate nearly half the forecasted mortgage losses, and those loss rates approach crisis levels.… Continue Reading
Time-on-Book Is Pyrite
There is no seasoning curve. There’s only 2009. Time-on-Book is a vacuous risk factor. Default humps are simply systemic events hitting whatever vintage ages happen to be on the book, not a law of loan age. We use public Fannie Mae data to make the point.… Continue Reading
Credit Regimes, Risk Management, and the Value of Stress Testing
In loss forecasts, especially stress tests, banks estimate what they could lose, but most stop there. Credit losses exist in regimes — long stretches of nothing punctuated by sharp, severe transitions — and the only value of stress testing is deciding what to do before the shift happens. Most banks … Continue Reading