As you know, interest rates are historically low, and due to the Fed's recent purchases of long-term bonds, some say rates are artificially low. This may skew your Asset Liability Management (ALM) analysis results towards the favorable side, so take caution when putting long-term mortgages or mortgage-related investments on the books. Rates are expected to hold steady through the summer, but can move up quickly once the economy turns around.
There are numerous ALM topics to discuss at your ALCO meetings, but here are a few . . . 1. A three-year income simulation; will net income be recover within a reasonable amount of time in a rising rate environment? 2. What will happen to your Net Worth if rates rise suddenly? 3. Projected repayment speeds on Mortgages will slow if rates go up (who would want to refinance if their rate is lower than the market?) are you in a position to hold mortgages for the longer term?
Your ALM software results can only take you so far. Spend some time reviewing your credit union's unique position in the marketplace and use ALM analysis as a tool to help make decisions regarding which products you will need to focus your marketing efforts on. Don't be afraid to sell to Freddie and Fannie to control the number and types of Mortgage loans you keep on your credit union's books.
Incidentally, if I had a choice, I'd prefer to be called Freddie rather than Fannie, even if I were a girl. But that's just me.
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