The risk associated with taking applications from prospective mortgage borrowers who may opt to decline to accept a quoted mortgage rate within a certain grace period.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
In mortgages, the risk that the prospective borrower will decline a mortgage within a certain period of time. Many lenders agree to set the interest rate at the prevailing rate at the time the sale of the property closes. The lender is therefore exposed to the risk that the prevailing interest rate will fall between the time the agreement is reached and the closing of the sale. If the borrower declines the mortgage between that agreement and the close, the lender will have lost the potential gain from the higher interest rate. See also: Reverse Price Risk.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved