Risk Management & Analytics: Are banks and credit unions too comfortable with their liquidity positions?

Are banks and credit unions too comfortable with their liquidity positions?

Amid very positive economic conditions nationwide, many financial institutions have excess cash and liquidity. At the same time, while economists can only speculate when we might start to see signs of the next recession, banking regulator expectations about liquidity risk management are at an all-time high.

With this in mind, MountainView Financial Solutions, a Situs company, is presenting Measuring and Managing Liquidity Risk, a webinar on Wednesday, Oct. 3. MountainView’s objective is to show best practices for modern-day liquidity risk management at institutions of all sizes.

In structuring the information she’ll be presenting in the webinar, Chris Mills, Managing Director and Head of Model Validations at MountainView, highlighted key liquidity risk management challenges that exist at institutions nationwide: a silo approach to risk management, appropriate liquidity measures and metrics, dynamic modeling assumption issues, liquidity buffers, the availability of contingent sources of liquidity and data limitations.

Mills will be presenting a five-part framework for addressing these challenges, and an underlying thought in her information is that risk management staff need to understand what could break their specific institution. She will also discuss regulator expectations about stress testing and illustrate the preferred assumptions for use in liquidity modeling.


Mortgage fraud risk on the rise

Irvine, California-based CoreLogic, a property information, analytics and data-enabled solutions provider, revealed a 12.4% increase in fraud risk at the end of the second quarter, in its latest Mortgage Fraud Report.

The analysis, as measured by the CoreLogic Mortgage Application Fraud Risk Index, found during the second quarter of 2018, an estimated one in 109 applications, or 0.92% of all mortgage applications, contained indications of fraud, compared with the reported one in 122, or 0.82% in the second quarter of 2017.

The CoreLogic Mortgage Fraud Report analyzes the collective level of loan application fraud risk experienced in the mortgage industry each quarter. CoreLogic developed the index based on residential mortgage loan applications processed by CoreLogic LoanSafe Fraud Manager, a predictive scoring technology. The report included detailed data for six fraud type indicators that complement the national index: identity, income, occupancy, property, transaction and undisclosed real estate debt. The report calculated the estimated number of fraudulent applications by applying the current risk level of CoreLogic Mortgage Fraud Consortium applications to industry volumes.

“This year’s trend continues to show an increase in mortgage fraud risk year over year,” Bridget Berg, principal of fraud solutions strategy for CoreLogic said.

Read more: Credit Union Times


Currency hedging and risk management becomes more common

Currency hedging has long been a part of global business and trade — but now it is becoming more important, thanks to increasing economic and political volatility. In a new PYMNTS interview, Karl Schamotta, regional director of risk management solutions at Cambridge Global, which sells currency hedging and related services — tasks that have recently assumed greater importance in e-commerce and other industries because of the stronger U.S. dollar and other factors — explores those issues from the point of view of farmers.

Schamotta talked about managing risk and hedging currency fluctuations in, perhaps, the world’s oldest form of production and commerce — a job that’s become more difficult in recent years, even with the benefits of digitalization.

“We’re seeing more economic and political volatility than we’ve seen in a long time, along with a lot of trade concerns,” Schamotta said. “The environment is a lot more unpredictable.”

Read more: PYMNTS


Freddie Mac mortgage pool receives preliminary credit risk rating

Last week, Kroll Bond Rating Agency (KBRA) assigned preliminary ratings to four classes of certificates from Freddie Mac’s Structured Agency Credit Risk (STACR) Securitized Participation Interests Trust, Series  2018-SPI3 (STACR 2018-SPI3), a credit risk sharing transaction with a total certificate offering of $258,781,458. This is Freddie Mac’s fourth risk transfer deal under the STACR SPI shelf.

KBRA’s loan rating methodology consists of loan originator and servicer reviews, loan file reviews, loan analysis, and RMBS modeling, assessment of securitization structure, and surveillance.

According to KBRA, Freddie Mac’s STACR  2018-SPI3 mortgage pool consists of 19,195 residential mortgage loans with an aggregate cut-off balance of approximately $6.5 billion, which are fully amortizing, fixed-rate mortgages (FRM) of prime quality.

Read more: DS News


Click here to subscribe to Situs Newswatch.

Thank you for choosing the Situs Newswatch. If you want to see your company here or have an idea for coverage, please respond to this email or email inquiries@situs.com for more information.