Exploring a Trio of Risks and Outcomes

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Posted To: MND NewsWire

A recent Freddie Mac Insights article looks back at earlier incidences of rising rate environments, and how the higher rates affected several populations including borrowers, mortgage lenders, homeowners, real estate agents, and home builders. MND summarized those findings in an earlier article and today we look at the second half of the analysis. Doug McManus, Freddie Mac Quantitative Analytics Director and Elias Yannopoulos, Quantitative Analytics Senior, consider the risk factors that drive movements in mortgage rates and the possibilities for rate changes in the near- to mid-term. Lenders and guarantors have three main risks when issuing a mortgage: credit risk, prepayment risk, and inflation risk. Credit risk is the possibility that the borrower might not pay back the loan. Conversely…(read more)

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