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ACE

Delinquency rate is not the proper metric to use when comparing effectiveness of ACE / waivers versus appraisals. The purpose of the valuation is not to prevent delinquency or default, but to manage the amount of losses in the event of default. It is credit risk (credit score, employment history, and income) that are linked to delinquency and default rates.

You are an intelligent person so I know this is not news to you. The delinquency rate metric is just being used to push the use of waivers forward.

Fact is nobody will know how ACE performs compared to appraisals until there is a big decline in market values and then someone analyzes losses on loans with appraisals versus losses on loans with waivers.
Exactly. Credit underwriting addresses the risk of delinquency (or should). Collateral underwriting addresses the risk of loss in the case of a delinquency.
 
One can look at the loss numbers instead of the delinquency rate. The story is the same.
 
I guess it depends on who that 'one' is. When the holders of the data are also the ones conducting the studies, I'm sure you'll understand the skepticism.
 
GSE's should be able to manage risk the way they see fit. The government and tax payers shouldn't be responsible for any losses though.
 
And since the implied guarantee isn’t going away anytime soon, their risk management practices and the data used to make these decisions should be open to outside scrutiny.

Good one.
 
And since the implied guarantee isn’t going away anytime soon, their risk management practices and the data used to make these decisions should be open to outside scrutiny.

Yeah, so dirty. Anybody that knows anything can see that they are misleading not only regulators but also MBS investors.
 
A natural consequence of monopoly and being too big to fail is too big to be honest.
 
I don't think it's entirely fair to task the GSEs with what amounts to social entitlement functions and concurrently expect them to operate the same way a conventional investor can operate. We don't expect FHA to operate that way despite their respective parallels. FHA is more govt/less enterprise, of course; but the GSEs are not free to operate solely off of their P/L. They're something in-between . For the moment, anyway.
 
That's correct - when playing with OPM, you'd expect them to be MORE risk averse WRT the social entitlement functions.
 
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