{"id":32946,"date":"2018-03-30T07:51:55","date_gmt":"2018-03-30T12:51:55","guid":{"rendered":"http:\/\/olduvai.ca\/?p=32946"},"modified":"2018-03-30T07:53:38","modified_gmt":"2018-03-30T12:53:38","slug":"the-looming-mortgage-liquidity-crisis","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=32946","title":{"rendered":"The Looming Mortgage Liquidity Crisis"},"content":{"rendered":"
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THE LOOMING MORTGAGE LIQUIDITY CRISIS<\/span><\/a><\/h3>\n<\/header>\n
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Every 10 years or so there is a banking crisis. We are due. However, the furthest thing from most people\u2019s minds with the Trump boom is a banking\/financial crisis, except for a few folks at the Brookings Institution, who just released a paper entitled\u00a0\u201cLiquidity Crisis in the Mortgage Marke<\/a>t.\u201d<\/p>\n

You Suk Kim, of the Federal Reserve Board; Steven M. Laufer, who also labors on the Federal Reserve Board along with Karen Pence, plus, Richard Stanton of the University of California, Berkeley, and Nancy Wallace, also of University of California, Berkeley, to give away the punchline from their paper\u2019s abstract, write, \u201cWe describe in this paper how nonbank mortgage companies are vulnerable to liquidity pressures in both their loan origination and servicing activities, and we document that this sector in aggregate appears to have minimal resources to bring to bear in a stress scenario.\u201d<\/p>\n

John and Joan Q. Public believe the 2018 mortgage business is like George Bailey\u2019s Building & Loan in \u201cIt\u2019s a Wonderful Life<\/a>.\u201d People deposit money, bankers lend it out, keeping the mortgage on their books. Easy Peasy.<\/p>\n

As the folks from Brookings point out, it\u2019s not that easy in these dark days of financial engineering. George Bailey\u2019s handshake, promise and maybe a few words on a document to be signed by the borrower which meant simply, \u201cI\u2019ll pay you back,\u201d has become a financial instrument, to be traded and hypothecated by faceless financial bureaucrats, each one taking a sliver of profit off the top.<\/p>\n

Everyone remembers the crash of 2008 and plenty explanations have been posited. What the writers for Brookings explain is,<\/p>\n

The literature has been largely silent on the liquidity vulnerabilities of the short-term loans that funded nonbank mortgage origination in the pre-crisis period, as well as the liquidity pressures that are typical in mortgage servicing when defaults are high. These vulnerabilities in the mortgage market were also not the focus of regulatory attention in the aftermath of the crisis.<\/p><\/blockquote>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n

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THE LOOMING MORTGAGE LIQUIDITY CRISIS Every 10 years or so there is a banking crisis. We are due. However, the furthest thing from most people\u2019s minds with the Trump boom is a banking\/financial crisis, except for a few folks at the Brookings Institution, who just released a paper entitled\u00a0\u201cLiquidity Crisis in the Mortgage Market.\u201d You […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[2014,7380,16451,303,312,19549,19550,19551,6879,3650],"class_list":["post-32946","post","type-post","status-publish","format-standard","hentry","category-economics","tag-banking-crisis","tag-cobden-centre","tag-doug-french","tag-fed","tag-financial-crisis","tag-mortgage-liquidity-crisis","tag-mortgage-market","tag-nonbank-mortgages","tag-shadow-banks","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/32946","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=32946"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/32946\/revisions"}],"predecessor-version":[{"id":32947,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/32946\/revisions\/32947"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=32946"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=32946"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=32946"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}