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Definition of Mortgage-pipeline risk
The risk associated with taking applications from prospective mortgage borrowers
A type of mortgage pipeline risk that is generally created when the terms of the loan to be
Variations of mortgage instruments such as adjustable-rate and variablerate
The amount of total risk that can be eliminated by diversification by
The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.
The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for
risk of a firm measured from the standpoint of an investor who holds a highly diversified portfolio.
The risk that the cash flow of an issuer will be impaired because of adverse economic
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.
mortgage against which no additional debt may be issued.
A security backed by a pool of pass-throughs , structured so that
A loan made on real estate collateral, other than a residential property, in which a mortgage is given to secure payment of principal and interest.
The risk that a foreign debtor will be unable to pay its debts because of business events,
Related: Unsystematic risk
See asset-specific risk
The risk that a project will not be brought into operation successfully.
A loan based on the credit of the borrower and on the collateral for the mortgage.
The risk that the other party to an agreement will default. In an options contract, the risk
Country financial risk
The ability of the national economy to generate enough foreign exchange to meet
Country risk General
Level of political and economic uncertainty in a country affecting the value of loans or
The risk that an issuer of debt securities or a borrower may default on his obligations, or that the
Financial and moral risk that an obligation will not be paid and a loss will result.
Refers to the volatility of returns on international investments caused by events associated
Related: Exchange rate risk
Currency risk sharing
An agreement by the parties to a transaction to share the currency risk associated with
Also referred to as credit risk (as gauged by commercial rating companies), the risk that an
Related: unsystematic risk.
In project financing, the risk that the project's output will not be salable at a price that will
Equilibrium market price of risk
The slope of the capital market line (CML). Since the CML represents the
The risk that the ability of an issuer to make interest and principal payments will change because
Exchange rate risk
Also called currency risk, the risk of an investment's value changing because of currency
The variability of a firm's value that results from unexpected exchange rate changes or the
The risk that the cash flow of an issuer will not be adequate to meet its financial obligations.
risk to shareholders resulting from the use of debt.
See:diversifiable risk or unsystematic risk.
Flat price risk
Taking a position either long or short that does not involve spreading.
Force majeure risk
The risk that there will be an interruption of operations for a prolonged period after a
Foreign exchange risk
The risk that a long or short position in a foreign currency might have to be closed out
Freddie Mac (Federal Home Loan Mortgage Corporation)
A Congressionally chartered corporation that
Related: interest rate risk
GEMs (growing-equity mortgages)
mortgages in which annual increases in monthly payments are used to
risk that arises when an issuer has policies concentrated within certain geographic areas,
GMCs (guaranteed mortgage certificates)
First issued by Freddie Mac in 1975, GMCs, like PCs, represent
Government National Mortgage Association (Ginnie Mae)
A wholly owned U.S. government corporation
Graduated-payment mortgages (GPMs)
A type of stepped-payment loan in which the borrower's payments
The risk of loss in foreign exchange trading that one party will deliver foreign exchange but the counterparty financial institution will fail to deliver its end of the contract. It is also referred to as settlement risk.
High-Risk Small Business
Firm viewed as being particularly subject to risk from an investors perspective.
Unsystematic risk or risk that is uncorrelated to the overall market risk. In other words,
Also called purchasing-power risk, the risk that changes in the real return the investor will
The risk that a firm will be unable to satisfy its debts. Also known as bankruptcy risk.
An insured mortgage protects only the mortgage lender in case you do not make your mortgage payments. This coverage is provided by CMHC [Canada mortgage and Housing Corporation] and is required if a person has a high-ratio mortgage. [A mortgage is high-ratio if the amount borrowed is more than 75% of the purchase price or appraised value, whichever is less.]
Interest rate risk
The risk that a security's value changes due to a change in interest rates. For example, a
Interest Rate Risk
Possibility that interest rates will rise during the term of a loan thereby increasing the annual cost of borrowing.
judgmental method (of risk adjustment)
an informal method of adjusting for risk that allows the decision maker
The risk that arises from the difficulty of selling an asset. It can be thought of as the difference
Market price of risk
A measure of the extra return, or risk premium, that investors demand to bear risk. The
risk that cannot be diversified away. Related: systematic risk
The amount of total risk that cannot be eliminated by portfolio
Economywide (macroeconomic) sources of risk that affect the overall stock market. Also called systematic risk.
The part of security's risk that cannot be eliminated by diversification. It is measured by the beta coefficient.
market risk premium
risk premium of market portfolio. Difference between market return and return on risk-free Treasury bills.
A loan secured by the collateral of some specified real estate property which obliges the borrower
Debt instrument by which the borrower (mortgagor) gives the lender (mortgagee) a lien on property as security for the repayment of a loan.
Securities backed by a pool of mortgage loans.
Mortgage-Backed Securities Clearing Corporation
A wholly owned subsidiary of the Midwest Stock
A bond in which the issuer has granted the bondholders a lien against the pledged assets.
Mortgage (Credit Insurance)
An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for purposes of purchasing a loan secured by a home.
A modification of standard duration to account for the impact on duration of MBSs of
Commonly sold in the form of reducing term life insurance by lending institutions, this is life insurance with a death benefit reducing to zero over a specific period of time, usually 20 to 25 years. In most instances, the cost of coverage remains level, while the death benefit continues to decline. Re-stated, the cost of this kind of insurance is actually increasing since less death benefit is paid as the outstanding mortgage balance decreases while the cost remains the same. Lending institutions are the most popular sources for this kind of coverage because it is usually sold during the purchase of a new mortgage. The untrained institution mortgage sales person often gives the impression that this is the only place mortgage insurance can be purchased but it is more efficiently purchased at a lower cost and with more flexibility, directly from traditional life insurance companies. No matter where it is purchased, the reducing term insurance death benefit reduces over a set period of years. Most consumers are up-sizing their residences, not down-sizing, so it is likely that more coverage is required as years pass, rather than less coverage.
Mortgage Life insurance (Credit Insurance)
Decreasing term life insurance that provides a death benefit amount corresponding to the decreasing amount owed on a mortgage.
Mortgage pass-through security
Also called a passthrough, a security created when one or more mortgage
The period from the taking of applications from prospective mortgage borrowers to the
The interest rate on a mortgage loan.
The lender of a loan secured by property.
The borrower of a loan secured by property.
risk that cannot be eliminated by diversification.
Nonmarket or firm-specific risk factors that can be eliminated by diversification. Also
mortgage against which additional debts may be issued. Related: closed-end mortgage.
The inherent or fundamental risk of a firm, without regard to financial risk. The risk that is
operating risk (business risk)
risk in firm’s operating income.
Overnight delivery risk
A risk brought about because differences in time zones between settlement centers
Possibility of the expropriation of assets, changes in tax policy, restrictions on the exchange of
The risk that the value of a security (or a portfolio) will decline in the future. Or, a type of
A type of mortgage-pipeline risk that occurs when a lender has an unusual loan in production or
Related: inflation risk
RAMs (Reverse-annuity mortgages)
mortgages in which the bank makes a loan for an amount equal to a
In banking, the risk that profits may decline or losses occur because a rise in interest rates forces up
Regulatory pricing risk
risk that arises when regulators restrict the premium rates that insurance companies
The risk that proceeds received in the future will have to be reinvested at a lower potential
REMIC (real estate mortgage investment conduit)
A pass-through tax entity that can hold mortgages
Related: unsystematic risk
Reverse price risk
A type of mortgage-pipeline risk that occurs when a lender commits to sell loans to an
Typically defined as the standard deviation of the return on total investment. Degree of uncertainty of
uncertainty; it reflects the possibility of differences between
The degree of uncertainty associated with the return on an asset.
A state in which the number of possible future events exceeds the number of events that will actually occur, and some measure of probability can be attached to them.
risk measures the possibility that your investment may lose or gain value as compared to the expected rate of return. risk is different from uncertainty, which is not measurable.
Calculated chance of loss.
return Return earned on an asset normalized for the amount of risk associated with that asset.
risk-adjusted discount rate method
a formal method of adjusting for risk in which the decision maker increases the rate used for discounting the future cash flows to compensate for increased risk
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