My Opinion: We Need to Raise Rates another 3-5% to help combat a massive wave of inflation people are borrowing way to much and using there homes as an ATM machine and also a Life raft ! I believe when cities start to go broke they will start hiking property taxes and fines and punishing middle class citizens !
we’re approaching a very important window for borrowers. The stars have aligned, and over 47% of mortgages are going to be renewing within the next 12 months. Another 31% of mortgages will renew over the next 1 to 3 years. We have the potential peak of mortgage growth, and a huge number of renewals. All of this data is hitting us just a touch over 3 weeks from today.
What Is Stress Testing?
Stress testing is a computer simulation technique used to test the resilience of institutions and investment portfolios against possible future financial situations. Such testing is customarily used by the financial industry to help gauge investment risk and the adequacy of assets and help evaluate internal processes and controls. In recent years, regulators have also required financial institutions to carry out stress tests to ensure their capital holdings and other assets are adequate.
Understanding Stress Testing
Companies that manage assets and investments commonly use stress testing to determine portfolio risk, then set in place any hedging strategies necessary to mitigate against possible losses. Specifically, their portfolio managers use internal proprietary stress-testing programs to evaluate how well the assets they manage might weather certain market occurrences and external events.
Asset and liability matching stress tests are widely used, too, by companies that want to ensure they have the proper internal controls and procedures in place. Retirement and insurance portfolios are also frequently stress-tested to ensure that cash flow, payout levels, and other measures are well aligned.
Regulatory Stress Testing
Following the 2008 financial crisis, regulatory reporting for the financial industry—specifically for banks—was significantly expanded, focusing on stress testing and capital adequacy, mainly due to the 2010 Dodd-Frank Act.
Beginning in 2011, new regulations in the United States required the submission of Comprehensive Capital Analysis and Review (CCAR) documentation by the banking industry. These regulations require banks to report on their internal procedures for managing capital and carry out various stress-test scenarios.
In addition to CCAR reporting, banks in the United States deemed too big to fail by the Financial Stability Board—typically those with more than $50 billion in assets—must provide stress-test reporting on planning for a bankruptcy scenario. In the government’s most recent reporting review of these banks in 2018, 22 international banks and eight based in the United States were designated as too-big-to-fail.