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Won't this result in new mortgage rates spiking massively (not only now, but after the crisis is resolved, because it's a newly identified form of tail risk?)
by esotericn 7y ago
Won't this result in new mortgage rates spiking massively (not only now, but after the crisis is resolved, because it's a newly identified form of tail risk?)
Not that it's important right now, but it seems like an interesting side-effect.
- AzzieElbab 7y agoPossibly, not sure how mortgages insurance is setup in Italy
- sp332 7y agoIt looks like this was done by the banks voluntarily. So it doesn't increase the risk of this happening again in the future as a surprise. Secondly, this probably reduces the amount of defaults, liens, foreclosures etc. happening all at once that a bank really would rather not deal with. Edit: according to https://www.bloomberg.com/news/articles/2020-03-10/italy-negotiating-with-banks-for-mortgage-relief-in-virus-crisis https://www.bloomberg.com/news/articles/2020-03-10/italy-neg... the government negotiated this with the banks, and TFA says that not all banks took the deal. So whatever it was, it probably softened the blow a lot.
- raducu 7y agoSurely not as a surprise, this thing will be back next fall.
- Nasrudith 7y agoWhy would it be massive? I can see a smaller "average restoring" spike at most since thankfully another sufficiently bad epidemic occuring is already a very low probability - once per century pessimisitcally based on data.
- Mvandenbergh 7y agoArguably the tail risk is that something happens which prevents many people paying their mortgages and this risk was already understood. This is a form of control which accepts the inevitable and ensures that there is no messy mass default process.
- dr-detroit 7y agoRates are low and will bottom out soon because of the recession period we are entering.