Rising interest rates will probably increase the payment-shock risk for borrowers in the U.S. market for option adjustable-rate mortgages, which may lead to higher defaults and losses on option-ARM pools compared with interest-only or hybrid mortgage pools, according to Fitch Ratings.In a report on its revised rating methodology for option ARMs, Fitch said the degree of payment-shock risk and loan balance growth is determined largely by the initial teaser rate, the volatility of a particular index, and balance caps. "The higher payment-shock risk for the option ARMs is due to the minimum-payment option that keeps payments low for up to five years, but then can result in a 'recast' requiring a much higher payment," said Glenn Costello, a Fitch managing director. "That payment may reflect a larger balance, due to negative amortization. .... The borrower's risk of default is exacerbated in a rising rate environment." Fitch recently completed a historical analysis of over 65,000 negatively amortizing loans from 1994 through 2004. Fitch can be found online at http://www.fitchratings.com.
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According to the Federal Reserve Board's latest financial stability report, persistent inflation and policy uncertainty are the primary worries for banks. Survey respondents expressed heightened anxiety over murky policy outlooks due to geopolitical turmoil and rapidly approaching domestic elections.
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Leaders of ORNL Federal Credit Union are piloting Zest AI's new artificial intelligence-powered assistant to ensure equitable underwriting practices and measure performance against similar institutions.
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McCargo stabilized the agency at a crucial time as she helped navigate it through both a pandemic and subsequent dramatic interest-rate cycle change.
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The quasi-public entity's plan to buy certain closed-end seconds would constitute "unnecessary government encroachment," the Structured Finance Association said.
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The mortgage subsidiary of Hilltop Holdings posted another quarterly loss and volume slipped, but management also sees signs of optimism.
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The increasing frequency and severity of droughts was top of mind for panelists at AmeriCatalyst's "Going to Extremes" conference Thursday.
April 18