AI deepfakes and mortgages: how big is the risk?
National Mortgage News
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With artificial intelligence able to create convincing clones of everyone from Warren Buffett to one's own family members, the mortgage industry, like others in the financial world, will need to address the rise of deepfakes. The technology has already shown it can hobble a company financially, and artificial intelligence technology can make fraud easier to commit and costlier to fix . While the ability to manipulate video and audio is nothing new, ease of access to the newest cyber weapons expedited their arrival in mortgage banking. But growing awareness of the problem and authentication tools, when employed, may also help keep fraudsters at bay.?
Delinquencies are trending down again, with the number of home loans past due by 90 days or more hitting its lowest level in nearly 19 years. The national delinquency rate, for all mortgages 30 or more days past due but not in foreclosure, was 3.09% at the end of April, according to Intercontinental Exchange. It's the second-lowest figure on record behind a 2.92% rate in March 2023. April's late payment metrics featuring widespread declines are a contrast from a recent, small spike last month. Serious delinquencies fell to their lowest level since August 2005, ICE reported.?
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A lot of low-coupon mortgage servicing in the current market has almost no prepayment risk, but it does have exposure to another rate-related concern that's grown, speakers at a recent industry meeting warned. "If you look at the field of mortgage bankers that are here, you might say, why would I ever hedge that? Well, you're not hedging prepayment risk, you are hedging the value of the cash flows, that is, the escrow balances," said Austin Tilghman, CEO of United Capital Markets. Property taxes have soared in many areas as have homeowner insurance costs , and that's boosted interest rate risk associated with escrowed funds, speakers on servicing challenges at the Mortgage Bankers Association's Secondary and Capital Markets Conference noted.
Federal Reserve Gov. Michelle Bowman said the central bank might’ve been too quick to take its foot off the gas for its balance sheet reduction efforts. In a Tuesday speech, Bowman said the level of reserves — funds held at the Fed by commercial banks — remains roughly unchanged from where it was when the FOMC began tightening two years ago. "In light of these conditions, I would have supported either waiting to slow the pace of balance sheet runoff to a later point in time or implementing a more tapered slowing in the pace of runoff," she said. Later this week, the FOMC will cut the pace of its balance sheet reduction effort by lowering the monthly cap on the amount of Treasuries that can come off its books from $60 billion to $25 billion.?
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