Material Risks - Examples (Supplied by Industry Members)

"What are examples of material risks that you would disclose about a mortgage product to a borrower, lender or investor?".
 
  1. Pre-payment penalties.
  2.  
  3. If the mortgage product has a variable interest rate, the client needs to be aware of the potential for a higher interest rate.
  4.  
  5. With a VRM or ARM mortgage, the interest paid and/or payment amounts will change based on the prime lending rate.
  6.  
  7. Penalties, NSF fees, discharge fees, administrative fees, and what happens at the time of mortgage renewal.
  8.  
  9. Increasing the length of a mortgage (amortization period) to lower monthly payments will result in a higher amount of interest being paid in the long-run.
  10.  
  11. Property values can decline over time.
  12.  
  13. If the borrower is a seasonal or contract worker.
  14.  
  15. A single-use property poses a lesser risk than a multi-purpose or general purpose property.
  16.  
  17. If the borrower experiences job loss or loss of income.
  18.  
  19. Capacity of the borrower to make payments.
  20.  
  21. Credit worthiness of the borrower.
  22.  
  23. Character of the borrower.
  24.  
  25. If the borrower has no verifiable income.
  26.  
  27. If the borrower has a second or third mortgage on the property.
  28.  
  29. Tax arrears can impact equity.
  30.  
  31. What is the liability with respect to the borrower and lender?

 
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