Risk and Regulatory Insights: Are Banks Prepared for 2017’s Risks?

A post-election market euphoria may be masking a set of forces with the potential to unleash extreme volatility here and across the globe in 2017. After the financial crisis, attention to strengthening risk management practices across the industry grew, largely from intense regulatory focus embodied by such rules as heightened standards for risk governance. However, the economic environment of the last 5 years has not tested the resilience of risk management under anything approaching stress conditions. The question is whether the industry can maintain risk vigilance at a time when a long-awaited economic expansion may just be around the corner and as a host of other potential risks stalk financial markets. read more

Risk and Regulatory Insights: Why Anchoring FHA Premiums to Actuarial Soundness Is Important

In a remarkable display of the speed of change in philosophy over FHA policy between the Trump and Obama Administrations, the new Administration on Inauguration Day suspended a recently announced 25bps reduction in FHA mortgage insurance premiums (MIP). FHA premiums which should be set based on statistically valid pricing models are instead overly influenced by policy. This is no way to run a portfolio where taxpayers face a contingent liability on future defaults on the $1 trillion plus FHA Mutual Mortgage Insurance (MMI) Fund. Providing FHA with the tools and analysis to effectively price and manage the MMI Fund helps ensure the long-term financial viability of this federally guaranteed loan portfolio. read more