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What percentages of conforming mortgages are sold off by the originators that wrote them, before the first payment is even due? If it is conforming, or close,
by basch 5y ago
What percentages of conforming mortgages are sold off by the originators that wrote them, before the first payment is even due? If it is conforming, or close, there is almost no risk for the initial underwriter? I could be way off base, but that's mostly what the article is about, that the people offering loans arent the ones holding the risk.
- mhog_hn 5y agoRegarding risk for the initial underwriter, there are two main elements I think: - fallout risk https://www.investopedia.com/terms/f/fallout-risk.asp https://www.investopedia.com/terms/f/fallout-risk.asp - pipeline risk: https://www.investopedia.com/terms/m/mortgage_pipeline.asp https://www.investopedia.com/terms/m/mortgage_pipeline.asp For the fallout risk an originator can typically model the impact on the value of a mortgage with a conservative low digit basispoint estimate (following past fallout patterns that have been observed for example), for the pipeline risk the originator may do some more exotic price modelling by deriving implied interest rate volatilities from market prices (of interest rate derivatives). Both risks are relatively speaking minimal given their short horizons and the (current) low volatility of interest rates. I am impressed with the quality of the website linked to by the author of this thread, great read!
- basch 5y agoThe website is of patio11 on hn https://news.ycombinator.com/user?id=patio11 https://news.ycombinator.com/user?id=patio11