Summary
Mortgage banking
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Extract
Whistling past the graveyard.
Running the numbers on what happens when you rely on production to hedge servicing, reveals that's not a very smart course.
Even without the impact of the proposed changes to the Financial Accounting Standards Board's Financial Accounting Statement (FAS) 65, protecting servicing assets - whether capitalized on not - should be of paramount concern to a mortgage banker. The hard lessons learned by companies no longer in operation or forced to take large write-downs as a result of the last low-interest-rate environment are testimony to this point. Regardless of the final form the revised FAS 65 takes, it will produce significantly greater interest rate sensitivity for servicers' balance sheets. In the current interest rate environment, many mortgage companies might find it difficult to focus on ways to protect their servicing portfolio from prepayment risk. Most of their en...See the full content of this document
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