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June 22, 2010
Lessons Learned: Risk Management Practices in the Mortgage Industry
Attached is a recent paper from Cliff Rossi, Managing Director of the University of Maryland’s Center for Financial Policy.
The paper emphasizes the importance of measuring risk-adjusted performance and return as opposed to traditional accrual GAAP ROE, the norm for many financial organizations (or simply volume). Additional key points that jumped out at us, which are confirmed by our collective experience, are the weak technology infrastructure and incentive problems, as well as the behavioral finance biases that cloud judgment and lead to overconfidence and herd-mentality. Well worth a read.
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Posted by ThomasEDay at June 22, 2010 02:02 PM