As we noted in our assessment of new FHFA guidance on third-party vendor risk, the GSEs’ regulator is clearly tidying up its policies ahead of Mel Watt’s likely departure early next year.  Here, we turn to guidance on interest-rate risk (IRR) management replacing FHFA’s last foray into this important area in 2004.  IRR is of course a risk with considerable systemic impact – think S&L crisis for starters.  FHFA wants more done about it, but nowhere nearly as much as the banking agencies demand.  This makes some sense given the GSEs’ different business model, but changes to it – notably CRT – increase IRR exposures in ways this new policy may well fail to capture.

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