Capital Markets Examiner School, Providence, RI

Warehouse Risks/Mitigates

Primary Risks

 Interest rate risk  Market/systemic risk

 Operational risk  Warehouse aging  Reputational risk  Conformance with investor guidelines  Others?

Mitigates  Risk management (limit structure, stress-testing, etc.)  Underwriting standards  IRR hedging  Credit hedging?

Hedge Period

Warehouse Interest-rate Hedging Period

Mortgage Loan  Application

Mortgage Loan Approval

Mortgage “Rate Lock” (occurs prior to closing) )

Mortgage Loan Closing (45‐60 days from app)

Mortgage Bonds Sold

(generally 30‐45  days after closing)

CMBS Loan Origination and Securitization Steps