In financial services risk management, there are risks that you can expect and prepare for, and there are risks that are out of your control, difficult to predict and can lead to serious setbacks for your institution.
When it comes to financial services risk management, many financial institutions seem to have risk management nailed down, from system implementation through processes and governance. However, when analysts at MountainView Financial Solutions, a Situs company, dive deep into risk management discussions with industry partners, we find that even the most well-organized and well-staffed institutions require regular self-evaluation to determine whether their approach to risk management is both tactical and strategic. While many of the challenges we see are unique to a specific risk function, often such challenges are a byproduct of broader risk management myths that cause financial institutions to make costly errors. Here are three key myths to avoid when developing your risk management approach:
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:
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.
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 first quarter of 2018, according to the latest MSR Industry Report produced by MountainView Financial Solutions, a Situs company. The largest gain among the 14 companies was 4.6%, and the largest loss was -3.3%.
With the Fed raising rates and long-term rates stabilizing, the yield curve is flattening, leaving financial institutions in a more vulnerable position. To offset the cost of funds and increase profit margins, many banks and credit unions are looking for ways to grab more market share, increase returns and appeal to a wider audience. Some lenders are taking on more risk by expanding credit boxes (appealing to under-served or complex borrowers) and loosening underwriting standards. With the ongoing rush to create and implement CECL models, how would expanding credit boxes impact your credit loss estimates?
From the third quarter of 2017 through the first quarter of 2018, the volume of re-performing loans (RPLs) traded in the secondary market exceeded the volume of non-performing loans (NPLs) for the first time. Amid these market conditions, RPL pricing has firmed up and in certain instances increased, while NPL pricing has held steady. These are two key findings in the Q1 2018 1st Lien Whole Loan Secondary Market Color report recently released by MountainView Financial Solutions, a Situs company.