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Mortgage Broking Rate Report

   

Added on  2019-11-12

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MORTGAGE BROKINGTASK – ARisksLending related risks are managed by lenders and not by consumers. This is becauserisk management is used for protecting the interest of the lenders and not the borrowers,although it is the borrower who pays for this protection in the form of interest and feeswhich are charged by the lender and these are dependent on the financial parameters ofthe borrower and the loan product availed, asserts Barkoczy, (2013).The first systemic risk for my clients. Fergus and Natalie, is the reset of payment andthis risk comes from rising interest rates. The mortgage rate asked by my clients is avariable rate, however most lenders do not offer loan at a variable rate right from thebeginning. The rate is fixed for a short period, at a rate lower than the regular rate, as aninducement and is then set to the market rate, as per Deutsch et al, (2011). Effect on ClientsUnder these conditions, the more the loan is consolidated against the property, the morewill the client be vulnerable to fluctuations in interest rates.The second systemic risk is related to income variations. In the developing economies,the lenders have adjusted interest rates to high rates of employment. This providessustainability to the lenders by generating a steady income through that mortgagelending.Effect on ClientsMy clients will not be effected as they have a steady income. This affects the lowerincome groups who have the least job security.The third systemic risk affecting the borrowers is related to fluctuating house prices.Since property values have become the key to sustainability of current level of lender’sdebt, it is the norm now not that the secured loans are related to the value of the asset asthese represent a major portion of most borrowers’ wealth portfolio, asserts Renton,(2012).Effect on Clients
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Housing is finding more relevance in portfolios as these are resources which are cashedeasily.Risk Mitigation Risk mitigation for borrowers is depended on the partnership between state, market andborrowers. Moreover, in most of the countries, direct mitigation by the state in the formof tax deduction for meeting interest payments for the unemployed mortgagors are nowbeing withdrawn. This is encouraging the establishment of market based insurancecompanies. Thus, states Cch, (2013). the state sponsored relaxations are being replacedby those of private operators in the form of debt cancellation, suspension contracts andthird-party guarantees. Thus, Credit Insurance, Loan Payment Protection Insurance andDebt Cancellation are now of real value to borrowers because failure on the part of theborrower in repaying the debt often results in higher costs on future borrowing andrestrictions on future credit access facilities. Although a variety of lending options arebundled together to cover the different unfortunate events, asserts Marsden, (2010), it isthe lender and not the borrower who determines the lending options and the unfortunateevents.TASK – BPre-QualificationPre-qualification is the first step taken by the lender to begin the loan process. In thisstep, the lender gathers information about the borrower's income and debts in order todetermine how much loan the borrower can get for the house proposed to be purchased.This is also necessary for selecting the type of loan which can be extended to theborrower as different loan programs create different payment options for the borrower.Here, as per Nethercott, Devos & Richardson, (2010), the lender will also take intoaccount the borrower's repayment ability and the borrower's timeframe to repay theloan.Mortgage Programs and RatesThis depends on how long the borrower plans to keep the property. If the borrower isplanning to sell the property in a short period, an adjustable loan term would be moresuitable. If the borrower is planning to keep the property for a longer period, then fixed
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