September 2, 2020 edition of Yield PRO TV Rate Desk with Michael Thomas. Relationships of leverage to risk; probability of loss vs loss given default and which carries more risk.
Rate Desk notes September 2, 2020
- Indices up, rally of record closings
- Crude $41.35
- UST yields .65
- 223(f) 2.15%
- 221(d)(4) 2.75%
- Fannie 2.95%
- Freddie 2.95%
- US passed 100% debt-to-GDP
- Is leverage a bad thing?
- Relationship of leverage to risk
- Probability of loss vs loss given default
- HUD FHA leverage provides better cash-on-cash return
- Low rate + longer term = lowest loan constant
- 11K HUD FHA mortgages—only 6 were 30-days past due
- GSEs use interest-only
- Which carries more risk? You decide?
- Lower leverage does not mean lower risk