Managing Rate Risk Is Top Priority, Poll Finds

By Saft, James H. | American Banker, March 21, 1994 | Go to article overview

Managing Rate Risk Is Top Priority, Poll Finds


Saft, James H., American Banker


A survey of mortgage lenders shows that companies are keenly aware of the need to manage interest rate risk.

The survey, conducted by the mortgage banking group of Price Waterhouse, queried 127 mortgage banks about their approaches to hedging.

Responses showed that a large percentage of companies, 66%, have established board-level committees to oversee interest-rate-risk matters. While the high percentage of high-level controls is striking, some may be concerned to learn that 19% of respondents felt that board members' understanding of interest rate risk either "needs improvement" or is "poor."

Profit Motive

Also worthy of note is the fact that 25% of the companies surveyed report that the objective of their secondary marketing function is to generate profits, as opposed to risk control.

This may be a result of the easy time secondary marketers had in 1993, as interest rates were generally obliging, dropping steadily and allowing many to book gains on loans sold to the market. …

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