MBANow: Radian’s Derek Brummer on Mortgage Risk Factors

The Mortgage Bankers Association released a new MBANow video featuring Derek Brummer, chief risk officer with Radian, Philadelphia, who discussed key risk factors in the mortgage market at the recent MBA Annual Convention & Expo in Denver.

The video can be viewed at https://www.youtube.com/watch?v=G_mYKONLkVo&feature=em-uploademail.

Brummer identified several risk factors for the mortgage market in the near future, including increasing interest rates. “The market has priced in a certain number of interest rate increases, which is below what the Fed is forecasting, so there is a potential impact from a macro perspective,” he said. “So when you have rates going up, and a lot of liquidity provided by central banks for a number of years, when you see rates go up, the question is, what impact does that have? It could have an impact in terms of a stock market correction, bond prices and that can have a contagion effect.”

More directly to the mortgage market, Brummer said how the market responds to increasing interest rates. “It’s been a number of years since people in the industry have seen increasing interest rates,” he said. “The question becomes, are institution properly hedged from a risk perspective? Is our modeling picking that up from a risk return perspective?…we could also see a movement toward adjustable-rate mortgages, and probably see a bigger impact on home price appreciation.”

Other videos in the MBANow series can be viewed at the MBA YouTube channel, https://www.youtube.com/watch?v=Swk2VUJeZFI&feature=em-uploademail. The videos are also available on the MBA Insights landing page, https://www.mba.org/publications/insights/insights-publication##SubscriberID####RND##&PageID=21109.