Risk ALM USA: mortgage investors’ extension risk balloons

Speaking at a roundtable at Risk’s ALM USA 2003 conference in New York today, Abdullah said that, if interest rates rise, mortgage servicers and GSEs will have a hard time extending the duration of their portfolios to compensate.

The fact that the Fed cut rates to 1% today isn’t very comforting, in light of the parallels to 1993-1994 when the Fed was forced to tighten sharply and rapidly. Mortgage investors, mortgage servicers and even community banks need to act now to manage the risk of an

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