What Is Your Alternative To OTS For Prepayment Information?
With the OTS having been merged into the OCC, credit unions are looking for alternative sources for loan prepayment information to use when quantifying interest rate risk (IRR). Unfortunately, there are a limited number of publicly available sources for this information. The Securities Industry and Financial Markets Association (SIFMA) is one publicly available source that provides a “street consensus” for long-term prepayments based on surveying institutions such as UBS, JP Morgan Chase and Morgan Stanley.
As discussed in our recent post, How Do You Know Your Modeling Assumptions Are Right?, whichever source institutions decide to use, the assumptions should be stress tested and documented in order to understand them better—as well as satisfy the “reasonable and supportable” component of the new NCUA rule on interest rate risk management and policy.
