The Institutional Risk Analyst

If JPM, PFSI or UWMC want to pay the government to wrap conventional MBS in a “AA+” sovereign rating, why should the Treasury say no?

We hear in the channel that banks with festering multifamily exposures are paying north of 10% for similar CRT transactions.

GS saw loss provisions fall slightly in Q2 2024 to $282 million but the number was still $600 million in the first half of the year...

The Basel Accord is one of the single biggest examples of a regulatory agency literally creating a new law from whole cloth.

The first comment to make is that consumer defaults are rising across the board. The only question we need to consider is the rate of change

Notice that the Fed stress test is silent on trillions of dollars in mark-to-market losses facing US banks from COVID-era securities

The larger banks led the way in January and February, but today the top 25 names in terms of total return include many smaller banks.

The Fed bank stress tests are another sign of magical thinking in Washington.

Ginnie Mae would rather have issuers raise the NPV of the MSR in cash today than take the price risk of holding the whole MSR through time.

Citigroup leads the pack with a net loss rate of 133 basis points (bp) that is almost five times the average for Peer Group 1 at 27 bp.

BMO arguably has the weakest reserve position among the large Canadian banks....

In the 1950s through maybe into the late 1990s, the FOMC could control mortgage interest rates....

How much in synthetic CRT transactions will be done in 2024? Our best guess is many hundreds of billions globally...

Powell won’t hit the two percent target, but he won’t change the target either.

We remind readers that unrealized losses on securities are still a bigger problem for banks than CRE.

Direct lenders are the pawnbrokers of the 21st Century for subprime commercial borrowers, usually firms financed via leveraged buyouts.

The unrealized losses on COVID era securities remain a huge problem for banks large and small, especially if long-term interest rates rise

Obviously, there should be no interest rate cuts by the FOMC without deficit reduction by Congress.

With a budget deficit projected to be $1.8 trillion in 2024, the odds of the FOMC actually controlling inflation are pretty low. 

We think it is reasonable to push expectations of a cut in the target for Fed funds into Q1 2025.