Borrower risk is defined as the type of risk that borrowers of any financial funds such as loans or mortgages are exposed to when they borrow either large or small amounts of money. Borrower risk mostly occurs when an individual borrows money against property or assets that have a high property value. If the borrower defaults in his unsecured loan repayment, the lender of the loan has the right to force the borrower to sell his property. Borrower risk is also the type of risk that is presented by low or high interest rates on borrowed funds which might make it difficult for the borrower to repay their loan (Strahan 1). Residential mortgage lending refers to a type of loan secured loan borrowed against real property and is usually acquired through the use of a mortgage note. The mortgage note is meant to highlight the existence of the loan when granting a mortgage which will secure the loan for the borrower (Dorsey and Rockwell 44).
Individuals who want to own or build their homes usually obtain financing through residential mortgage lending which can be obtained through a loan. These loans are usually purchased or secured against the property from a financial institution such as a bank or mortgage lending institution. In many countries around the world, individuals who want to build or buy their own homes are usually funded by mortgage loans. Very few individuals have enough savings or liquidated funds which they can use to purchase property or build their own houses. Residential mortgage lending provides such individuals with the appropriate amount of funds that they can use to build their own houses or buy their own property. The five main sources of residential mortgage lending that are used in the primary market include commercial banks, savings and loans associations, credit unions and mortgage companies (Dorsey and Rockwell 44).
[...] This will be a definition of borrower's risk and residential mortgage lending II. Factors that determine borrower's risk A. The factors that are used to determine the borrower risk will be discussed in this part of the discussion III. Relationship between Borrower's risk and residential mortgage lending A. The relationship between borrower's risk and residential mortgage lending will be discussed based on loan, property and borrower information B. How does this relationship differ from before and after the global financial crisis IV. Recommendations and Conclusion A. [...]
[...] The Journal of Real Estate Finance and Economics (2002): 5-32 Dorsey, Megan and Rockwell, David. Financing residential real estate. New Jersey: Rockwell Publishing Company Print Hamel, Gregory. What factors change interest rates? 9 January 2011. Web May 2011 Jacobs, Myles and Anseimo, Thomas. Residential real estate 2008 edition. Illinois: Illinois Institute for Continuing Legal Education Print Kolb, Robert W. Lessons from the financial crisis. [...]
[...] Borrower risk and the price and non-price terms of bank loans. October 2009. [...]
[...] During the financial crisis that began in 2007, mortgages issued to subprime borrowers began to decline after the value of real estate shoot up in the United States (Kolb 170). Majority of the mortgages that had been issued to the subprime borrowers were adjustable rate mortgages which began to reset themselves at higher interest rates once the value of property shot up. This had a negative effect on the securities that were used to back the adjustable rate mortgages which had mostly been held by financial lending firms such as banks and mortgage lending companies (Russo and Katzel 6). [...]
[...] If the borrower defaults in his unsecured loan repayment, the lender of the loan has the right to force the borrower to sell his property. Borrower risk is also the type of risk that is presented by low or high interest rates on borrowed funds which might make it difficult for the borrower to repay their loan (Strahan 1). Residential mortgage lending refers to a type of loan secured loan borrowed against real property and is usually acquired through the use of a mortgage note. [...]
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