Nom de Plumber is a Nom de Plume
In these tests of bank capital adequacy under a severely adverse economic scenario,
the projected losses for second-lien residential mortgages and HELOC’s would generally be less than 10% of principal balances. (See Table 5 in CCAR report).
That would be strangely lower than the actual default losses of first-lien Prime, Alt-A, and even some Agency mortgages during the current crisis.
This odd result for a major asset category at “systemically important” banks might challenge the perceived validity and stringency of Federal Reserve stress modeling.
Reliance upon these benign stress-tests may lull the regulators who built such models
into a false sense of security.