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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.

Five factors affecting credit union deposits

Five factors affecting credit union deposits

In today’s economic environment, financial institutions of all shapes and sizes need to think long-term about their balance sheet and business decisions. Credit Unions, in particular, are unique in that a large percentage of funding comes from member shares, money markets and Certificates of Deposit. Since deposits are a main source of funding, Credit Unions need to keep in mind the following five factors affecting deposit performance:

The CECL paradox and its impact on financial comparability

The CECL paradox and its impact on financial comparability

The Financial Accounting Standards Board (FASB) did not prescribe a specific approach when it required the Current Expect Credit Loss (CECL) standard, leaving it up to financial institutions to determine the best path forward. Since Allowance for Loan and Lease Losses (ALLL) is no longer an apples-to-apples comparison, how will this impact a financial institution’s ability to compare itself to its peers?

What financial modelers can learn from MoviePass when implementing CECL

What financial modelers can learn from MoviePass when implementing CECL

If you have followed the news about MoviePass and its recent financial downfall, you may have read about declining stock prices and angry customers, and made a mental note about what not to do in business. However, there is one critical but less obvious lesson to learn from the MoviePass pandemonium – and it is one that just might keep your financial institution from going down the wrong CECL road.

5 overlooked risks to watch in financial services

5 overlooked risks to watch in financial services

Yes, we all know cyber security is the top risk facing banks and companies across all industries. However, as financial industry leaders scramble to address cyber risk and security, other banking risk could easily fall under the radar. When assessing business risk in the coming quarter and heading into 2019, keep these sneaky culprits in mind:

MSR portfolio hedging continues to produce positive results

MSR portfolio hedging continues to produce positive results

Risk management activities for 14 of the largest holders of residential mortgage servicing rights (MSR) produced an average net gain in asset value of 0.4% during the second quarter of 2018, according to the MSR Industry Report released last week by MountainView Financial Solutions, a Situs company. The largest gain among the 14 companies was 4.5%, and the largest loss was 6.8%.

What five key activities should credit unions be doing today in their CECL projects?

What five key activities should credit unions be doing today in their CECL projects?

If credit unions want to stay on track for implementing the Current Expected Credit Loss (CECL) standard, they need to have already completed several milestone tasks and to complete several more by the end of the year. Credit unions also need to be sure they have allocated sufficient time to complete the tasks that need to be finished between 2019 and 2022.

Frequent valuations can be essential for pre-recession risk management of CMBS B-pieces

Frequent valuations can be essential for pre-recession risk management of CMBS B-pieces

Rising values for commercial real estate (CRE) have supported prices for commercial mortgage-backed securities (CMBS) for years. But with increasing talk about a cyclical peak in property values, or even a recession within the next couple of years, CMBS investors as a whole and B-piece investors in particular are starting to think about how they can prepare for the possibility of price declines.

CECL methodology will become part of bank M&A due diligence by mid-2019

CECL methodology will become part of bank M&A due diligence by mid-2019

After many quiet years, merger and acquisition (M&A) activity at banks has been on the rise in 2018, and several favorable trends will likely sustain the momentum through the remainder of the year. By the middle of 2019, as banks evaluate acquisition opportunities, they likely will add a new component to their customary due diligence: an exploration and understanding of the target company’s Current Expected Credit Loss (CECL) methodology.

What you missed in our August MSR webinar

What you missed in our August MSR webinar

Escrow custodial account earnings have a significant impact on mortgage servicing right (MSR) asset values, and – in contradiction to what many holders of the asset might think – mortgages of borrowers with low credit scores aren’t prepaying slower than loans to borrowers with higher credit scores.

What’s driving the increased trading of home equity loans?

What’s driving the increased trading of home equity loans?

Activity in the secondary market for home equity loans, also known as 2nd lien loans, has ramped up across most market segments in 2018. The spur behind the increased trading has been greater supply driven by higher prices, according to a new report from MountainView Financial Solutions, a Situs company.

Situs’ new strategic alliance with Radley Associates provides powerful cloud-based tool for CRE risk and analytics

Situs’ new strategic alliance with Radley Associates provides powerful cloud-based tool for CRE risk and analytics

Situs, the premier global provider of strategic business solutions for the real estate and financial services industry, today announced a strategic alliance with Radley Associates, creator of the ProMS, a leading cloud-based valuation, risk and portfolio management software for the commercial real estate (CRE) finance industry.

Institutions need to understand hidden risks in model validation

Institutions need to understand hidden risks in model validation

Regulators require the model validation process to ensure that financial institutions are properly modeling for risk. Beyond regulatory compliance, model validation also provides business leaders with confidence in their models and helps to reinforce or reassess business and balance sheet decisions shaped by model outcomes. Considering the importance of model accuracy and effectiveness, it is critical to understand hidden risks in model validation practices. Whether a financial institution develops its financial models internally or works with a third-party model software vendor, it is critical to ensure your model validation partner understands and considers hidden risks in model validation. Some such risks include:

NPL buyers should buy with greater focus on re-sale price in mind

NPL buyers should buy with greater focus on re-sale price in mind

In the residential whole loan market, many non-performing loan (NPL) buyers see an opportunity to rehabilitate borrowers, turn the assets into re-performing loans (RPLs) and eventually sell the assets to an investor that specializes in owning RPLs. The strongest buyers of RPLs are generally institutional buyers that oftentimes securitize the assets.

Effectively testing for basis risk and yield curve shape risk in interest rate risk analyses

Effectively testing for basis risk and yield curve shape risk in interest rate risk analyses

Changes in driver rate relationships are key influences determining the Interest Rate Risk (IRR) position of most institutions. Today, it is commonplace for financial institutions to incorporate testing for basis risk and yield curve shape risk in their IRR analyses. Three elements are needed for a successful basis risk and yield curve risk analysis solution: Asset Liability Management (ALM) model setup and fine tuning; defining the appropriate rate tests; and effectively communicating the institution’s Net Interest Income (NII) IRR position

Prices in the MSR market are strong — for pristine portfolios

Prices in the MSR market are strong — for pristine portfolios

“Strong” is an adjective frequently used to describe the prices paid for residential mortgage servicing rights (MSRs) in recent months. Beyond the glimmer, however, is the reality that only specific slices of overall portfolios are trading very well, and a lot of MSRs out there are not going to market, according to advisory firm MountainView Financial Solutions, a Situs company.

Is it a financial model or a tool?

Is it a financial model or a tool?

Ensuring compliance with key model risk management (MRM) guidelines and regulations requires that risk managers for financial institutions assess and validate all financial models. As economic conditions evolve and regulators demand greater balance sheet transparency, financial institutions are developing and managing more models than ever before. To meet regulatory guidelines, many financial institutions must decide whether a method of financial calculation is considered a financial model or a tool.

Webinar will give credit unions information they can act on for CECL preparations

Webinar will give credit unions information they can act on for CECL preparations

Where are credit unions at in their preparation for implementing the Current Expected Credit Loss (CECL) standard? What are the biggest challenges they’re facing? What insights and best practices can they glean and apply from the work their peers have done so far?